DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session shallowly mixed, with the West Texas Intermediate contract giving up earlier gains. The moves came despite a weakening U.S. dollar index as traders awaited the release of a weekly inventory report for signs of easing supply deficit in the United States ahead of the Memorial Day holiday.

U.S. commercial crude oil inventories are estimated to have declined by 600,000 barrels (bbl) for the week ended May 20, with expectations ranging from a decrease of 3.5 million bbl to an increase of 2.5 million bbl. Gasoline stockpiles are seen to have fallen 1.2 million bbl in the reviewed week after plunging more than 8 million bbl so far this month. At 220.2 million bbl, domestic gasoline stockpiles currently stand at the lowest level since December 2021 and some 8% below the five-year average.

Some analysts suggest that gasoline stockpiles are nearing a critically low level ahead of the start of Memorial Day that historically marks the beginning of the peak summer driving season in the United States. There are few signs that Americans would steer away from the road this summer despite a historical run-up in gasoline prices that reached $4 gallon in early March and have since continued to advance. AAA Travel projects this year's driving demand would match the pre-pandemic level in 2017 amid pent-up demand for vacations. Reflecting expectations for strong gasoline demand this summer, RBOB futures registered an all-time high $4.0640 per gallon on May 16 as traders simultaneously grew concerned over low inventory levels.

Distillates stocks are expected to have risen by a modest 200,000 bbl for the second week in a row from 105 million bbl, the lowest level in 14 years.

Refinery use likely increased by 0.7% from the previous week to 92.5% of capacity.

The closely watched survey from the American Petroleum Institute is scheduled for release at 4:30 p.m. EDT, followed by official data from the U.S. Energy Information Administration on Wednesday.

In financial markets, U.S. equities fell sharply earlier in the session before retracing losses as investors assessed the shape of the U.S. economy and how far the Federal Reserve is prepared to raise interest rates to tame inflation that is undermining growth. Many market watchers have become worried that the Fed's plan for aggressive monetary tightening could tip the U.S. economy into recession.

A disappointing report Tuesday showing U.S. new home sales decreased 16.6% to an annualized 591,000 pace, which is the weakest pace since April 2020, could be a sign that Fed interest rates increases are already slowing the economy. The figure fell well short of estimates for 749,000 new home sales.

In Eurozone, inflation across the 19-nation economic bloc pushed business expectations in May to the second weakest level seen over the past year, according to a private survey released overnight, reflecting growing concerns over the outlook for the manufacturing sector. While the service economy continued to report strong growth from pent-up pandemic demand, the manufacturing sector saw only a modest expansion for the second month in a row amid falling order book inflows. Meanwhile, prices charged for goods and services rose at the second-highest rate yet recorded by the survey, though the rate of inflation cooled slightly for the second consecutive month through May. In broader terms, the second quarter so far has consequently seen the weakest manufacturing expansion since the pandemic-related shutdowns in the second quarter of 2020.

At settlement, July WTI futures eased $0.52 to $109.77 per bbl, and the international crude benchmark Brent contract for July delivery edged up $0.14 to $113.56 per bbl. NYMEX June RBOB gained 1.33 cents to $3.8110 per gallon, while front-month ULSD edged 1.3 cents higher to $3.7818 per gallon.

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

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