DTN Oil

WASHINGTON (DTN) -- In market-on-close trade Tuesday, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed higher as traders positioned ahead of weekly inventory data from the American Petroleum Institute. That data is expected to show across-the-board draws from U.S. crude and refined products stocks and concerns over fuel shortages across southeastern states following the shutdown of the Colonial Pipeline spurred additional buying interest.

Also boosting oil futures, the U.S. Dollar Index continued its downtrend towards February's intrasession low of 89.675, settling at a 90.120 four-month low ahead of a key reading on inflation from The U.S. Bureau of Labor Statistics on Wednesday that is seen increasing 3.6% year-on-year in April.

Friday's disappointing employment report was a catalyst for the weakening greenback as investors raised their bets that the Federal Reserve would stick to its quantitative easing monetary policy for longer than previously thought. Jobs report was the latest data set showing inflationary pressures are popping up all over the place, with average monthly earnings increasing by 0.7% from the previous month.

On the supply side, traders continue to monitor efforts to restart the nation's largest pipeline network, the 5,500-mile 2.5 million barrels per day (bpd) Colonial Pipeline that has been shut down for four straight days following a ransomware cyberattack last Friday. The Colonial Pipeline Co. said in a statement Monday it would restart its network with a phased-in approach, with the company manually operating its mainline 4 utilizing existing inventory while lateral lines between terminals and delivery points are now fully operational.

The pipeline's shutdown might have had an impact on Gulf Coast refinery operations, with Motiva Enterprises LLC, operator of the 607,000 bpd Port Arthur, Texas, refinery, the nation's largest refinery, reportedly shut the 195,000 bpd VPS-4 crude distillation unit and the 80,000 bpd VPS-2 CDU along with the 49,000 bpd reformer and 19,200 bpd lube oil hydrocracker, according to reports. Temporary idling production on the two CDUs reduces production at the Motiva's refinery by 45%.

To help alleviate potential shortages, the Biden administration eased fuel regulations governing the sale of gasoline in three states and the nation's capital on Tuesday though May 18. The move could help bring more fuel to the area that is normally well supplied by the Colonial Pipeline system, a major U.S. artery for gasoline, diesel and jet fuel. Furthermore, the Department of Transportation initiated the process to issue a temporary waiver of the Jones Act, which would allow foreign-flagged vessels to transport fuel between U.S. ports.

Separately, U.S. crude oil stockpiles are expected to decrease by 2.2 million barrels (bbl) in the week ended May 7, with estimates ranging from a decrease of 4.5 million bbl to an increase of 1 million bbl. Gasoline stockpiles are expected to have fallen by 600,000 bbl from the previous week, while distillates supplies are seen to have been drawn down 1.2 million bbl from the previous week. Refinery use likely rose by 0.4% to 86.9% of capacity.

The closely watched survey from the America Petroleum Institute is scheduled for release at 4:30 p.m. EDT.

At settlement, NYMEX June West Texas Intermediate futures gained 36 cents to $65.28 bbl, and the international crude benchmark Brent contract for July delivery added 23 cents to $68.55 bbl. NYMEX June RBOB moved up 0.65 cents to $2.1399 gallon after trading at the highest price point since May 2018 at $2.2170 gallon on Monday, and NYMEX June ULSD futures rallied 2.51 cents to $2.0417 gallon, backing off Monday's $2.0776 16-month high on the spot continuous chart.

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