DTN Oil

WASHINGTON (DTN) -- Moving off early highs, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session modestly higher. The RBOB October contract gained strength after Colonial Pipeline said it shut its main gasoline and distillate fuel pipelines due to power outages in the greater Houston area triggered by now Tropical Storm Nicholas.

Tuesday afternoon, Colonial Pipeline said it resumed operations on Line one, which carries 1.4 million barrels per day (bpd) of gasoline from Texas refineries to the tank farm at Greensboro, North Carolina.

"Colonial Pipeline has begun receiving product from shippers impacted by power outages in the Houston area. As a result, we have resumed operations on Main Line 01 -- based on volume availability," said the pipeline operator in a bulletin to shippers Tuesday afternoon.

Colonial said it would resume operations on the 1.2 million bpd distillate fuel pipeline "once product is made available."

More than 300,000 customers across south-central Texas are still reported without power because of Tropical Storm Nicolas, down from 400,000. CenterPoint Energy -- a regional power provider for southeast Texas, said Tuesday that electricity is gradually coming back to its customers, but it might take until the end of the week for the system to fully recover. While Nicholas is the second major storm to impact the U.S. Gulf region in a little over two weeks, bringing heavy rains and causing power outages, most Texas refineries are operating normally.

Limiting the upside for the oil complex, the U.S. Dollar Index settled slightly lower, clawing back morning losses in afternoon trade after bouncing off a four-week low 92.290 following a cooler-than-expected reading on inflation for August that stoked concerns the Federal Reserve could delay tapering its $120 billion per month in bond buying.

The U.S. Bureau of Labor Statistics reported Tuesday morning the consumer price index slowed for the second consecutive month in August to 0.3%, following a 0.5% increase in the previous month and 0.9% surge in June. Over the last 12 months, all items index advanced 5.3% -- a smaller increase than the 5.4% rise for the one-year period-ended in July. The data finds inflationary pressures across the U.S. economy continue to ease as the costs associated with the economy's reopening, such as used cars, fade. The fresh reading also strengthens the Federal Reserve assumption that the recent surge in inflation is transitory and should fade over time as the reopening process continues to unfold.

Earlier in the session, the oil complex found support from upbeat demand projections from the International Energy Agency that said Tuesday morning in its monthly Oil Market Report fourth quarter demand growth would jump by 1.6 million bpd. Global oil demand is now expected to rise by 5.2 million bpd this year and by 3.2 million bpd in 2022. The new projections also follow a bullish outlook from the Organization of the Petroleum Exporting Countries that held global oil demand projections for this year steady, forecasting annualized growth of 6 million bpd despite the rapid spread of the Delta variant across major economies.

"Oil demand in 3Q 2021 has proved to be resilient, supported by rising mobility and travelling activities, particularly in countries that are part of the Organization of Economic Cooperation and Development," said OPEC Monday in their Monthly Oil Market Report.

On the session, NYMEX October West Texas Intermediate contract settled little changed at $70.46 barrel (bbl) and Brent crude for November delivery gained slightly to $73.60 bbl. NYMEX October RBOB futures advanced 1.15 cents to $2.1724 gallon and front-month ULSD futures added 0.30 cents for a $2.1613 gallon.

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