RBOB Up 1.5% on Large Gasoline Draw, USD Near Fresh High

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- In early trade Wednesday, oil and refined product futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange edged higher, with nearby-month RBOB contract leading the pack with a 1.5% after industry data reported a surprise drop in U.S. gasoline inventories during the week ended Sept. 18, offsetting a modest build in crude oil supplies.

The U.S. Dollar Index flipped between gains and losses in early trading after reaching a fresh nine-week high at 94.3, pressuring West Texas Intermediate futures in its first session nearest to delivery.

In early trade, NYMEX November WTI edged up 10 cents to $39.90 per barrel (bbl), straddling $40 bbl, with the ICE November Brent contract adding 19 cents in value to $41.91 bbl. The December Brent contract holds a $0.45 premium to November delivery. NYMEX October ULSD futures traded marginally higher at $1.1006 gallon, and front-month RBOB futures advanced 1.36 cents to $1.1779 gallon.

Traders now await official inventory data from the U.S. Energy Information Administration due out 10:30 a.m. ET. U.S. crude oil stocks are estimated to have declined 1 million bbl during the week ended Sept. 18 after the American Petroleum Institute reported Tuesday afternoon commercial stocks added 691,000 bbl with supplies at the Cushing hub in Oklahoma having increased just shy of 300,000 bbl. API data also showed gasoline stockpiles posted a steep draw of 7.735 million bbl versus estimates for a modest increase of 500,000 bbl and distillate inventories dropped 2.104 million bbl.

Overnight data out of the Eurozone showed economic recovery across the 19-nation bloc took a hard hit in September, with rising COVID-19 cases weighing on the service industries. Both Germany and France reported business activity in service industries is shrinking again with readings at 49.1 and 48.5, respectively.

The bright spot in the bloc's economy continues to be the manufacturing sector that has outperformed expectations in September despite the broader spread of the virus. German manufacturers reported an expansion to a 56.6 reading, up 3.6 points from the previous month. Taking services and manufacturing together, the composite Purchasing Manager Index for the Eurozone was barely above 50 at 50.1, which separates growth from contraction.

Investors will shift their focus back to the United States, with preliminary PMI data for September due out at 8:45 a.m. ET. Market consensus calls for continued expansion at 54.5, with a reading below the mark seen as bearish for the economic recovery in the United States.

Federal Reserve Chairman Jerome Powell Tuesday reassured elected officials the economy remains resilient but needs additional government aid to continue "healing" amid the pandemic. Earlier this month, the Federal Open Market Committee upgraded their 2020 economic projections, forecasting gross domestic product to contract at a softer pace of 3.7% compared with a 6.5% contraction expected in June, and the U.S. unemployment rate to improve modestly to 7.6% by year's end. Powell noted, however, most FOMC participants assumed additional fiscal action in response to the pandemic in their forecasts.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges