WTI Rallies as Traders Eye Stock Draw, Infrastructure Bill

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Recouping a portion of their steep losses from the previous two sessions, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied more than 2% on Tuesday. The gains came as traders positioned ahead of the weekly release of U.S. inventory data, with expectations for nationwide crude and gasoline inventories to have fallen last week amid peak demand for summer travel, while the passage of an infrastructure package by Senate lawmakers fueled additional buying interest.

On the session, NYMEX September West Texas Intermediate futures rallied $1.81 or 2.9% to settle at $68.29 per barrel (bbl), and international crude benchmark for October delivery advanced $1.59 to $70.63 per bbl, with both benchmarks reversing off Monday's 2 1/2-month low settlements. NYMEX September RBOB contract rallied 3.31 cents to $2.2679 gallon, and NYMEX September ULSD futures surged 3.81 cents to $2.0802 gallon at settlement.

Tuesday's higher settlements were spurred by a combination of bullish factors, including the bipartisan passage of a $1.2 trillion infrastructure bill by the U.S. Senate that is seen bolstering employment and fuel consumption in the second half of the year joined with upbeat demand forecasts from the Energy Information Administration for the remainder of 2021 despite an uptrend in COVID-19 infections in oil-consuming behemoths like China and the United States.

Support was also lent by expectations for the weekly change in commercial oil stocks, with U.S. crude oil stocks expected to have fallen by 600,000 bbl in the week ended Aug. 6, with gasoline stockpiles seen declining 1.8 million bbl from the previous week. Stocks of distillates are expected to have risen 100,000 bbl from the previous week. Refinery run rates likely rose by 0.4% to 91.7% of capacity.

The closely watched inventory report from the American Petroleum Institute will be released 4:30 p.m. EDT, followed by Wednesday's release of official supply data from the U.S. Energy Information Administration.

In its monthly Short-term Energy Outlook released Tuesday afternoon, the EIA projected gasoline consumption would average 8.8 million barrels per day (bpd) this year, still 500,000 bpd below the level seen in the second half of 2019.

"Growth in employment and increasing mobility have led to rising gasoline consumption so far in 2021," said EIA.

The agency left its 2021 global demand projections unchanged at 97.63 million bpd from the previous forecast despite the potential downside from the resurgent virus and its impact on mobility. The agency lowered 2022 global oil demand 100,000 bpd to 101.25 million bpd.

Separately, U.S. Senate overwhelmingly approved a bipartisan $1.2 trillion infrastructure bill on Tuesday aimed at rebuilding the nation's deteriorating roads and bridges. The legislation would be the largest infusion of federal funds into infrastructure projects in more than a decade. But the measure now faces a potentially rocky and time-consuming path in the House of Representatives, where the speaker, Nancy Pelosi, has said the House would not vote on the bill unless and until the Senate passes a separate, even more ambitious $3.5 trillion social policy bill this fall.

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

Liubov Georges