Oil Futures Waver Ahead of Stock Data, OECD Growth Outlook

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- After back-and-forth choppy trading for most of the session, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled mostly higher on Tuesday, supported by a softer U.S. Dollar Index and expectations that another large draw occurred from domestic crude and petroleum product stockpiles in the week ended Sept. 17, while downbeat growth forecasts from the Organization for Economic Cooperation and Development capped the market's upside.

NYMEX October West Texas Intermediate futures expired $0.27 higher at $70.56 barrel (bbl) and next-month delivery November WTI settled the session near parity at $70.49. Brent crude for November delivery added $0.44 for a $74.36 bbl settlement. NYMEX October ULSD futures advanced 1.48 cents to $2.1738 gallon and front-month RBOB futures eased 1 cent to $2.1052 gallon.

Tuesday afternoon, oil traders positioned ahead of weekly inventory data to be released from the American Petroleum Institute at 4:30 p.m. EDT followed by the official government report Wednesday morning. U.S. commercial crude oil stockpiles are expected to have decreased 2.4 million bbl in the week ended Sept. 17, with forecasts ranging from decreases of 500,000 bbl to 4.7 million bbl. Domestic crude oil inventories remained in a destocking pattern since the first week of August, drawing down more than 20 million bbl over the past two months. Gasoline stockpiles are expected to fall by 1 million bbl from the previous week and distillates supplies are expected to show a 900,000 bbl draw. Refinery use likely rose 1.8% to 83.9% of capacity.

OECD revised lower Tuesday morning its growth forecast for the United States and globally, citing higher-than-expected inflation. Global economic output is now expected to expand by 5.7% this year, down 0.1% from the previous forecast in May. OECD lowered its U.S. growth forecast from 6.9% to 6.0%. The OECD's eurozone forecast, however, was raised by one point to 5.3%, though the outlook varied within the single-currency bloc.

"The recovery remains very uneven, with strikingly different outcomes across countries," OECD said in its interim economic outlook.

OECD forecasts the average inflation rate across the G20 leading economies will hit 4.5% in the fourth quarter with 1.5% of that caused by higher shipping costs and commodity prices. The U.S. inflation forecast in 2021 has risen from 2.9% to 3.6%.

Revised inflation forecasts come ahead of a highly anticipated policy announcement from the U.S. Federal Reserve that is expected to outline the timetable for tapering $120 billion a month in bond and mortgage-backed securities purchases on Wednesday while also updating their projections on inflation, labor market and economic growth.

Fed Chairman Jerome Powell said in a recent speech during a Jackson Hole, Wyoming, forum he believed "if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year. I think it's clear that we have made substantial further progress on achieving our inflation goal. There has also been very good progress toward maximum employment."

In financial markets, the evolving saga around a potential imminent collapse of China's real estate conglomerate Evergrande continues to weigh on market sentiment, sending stocks on Wall Street lower for a second consecutive session. The market recovered briefly Tuesday morning before diving back into the red on the news that Evergrande missed loan payments to several banks on Monday. The highly indebted company faces additional maturities, with analysts debating whether the Chinese communist government will prevent a default. Evergrande employs over 200,000 people and manages more than 1,300 estates and projects around China.

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

Liubov Georges