NYMEX Oil Futures Advance Ahead of API Inventory Report

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Tuesday's session mostly higher ahead of the release of U.S. weekly inventory report that is expected to show nationwide crude oil inventories declined during the week ended Nov. 25.

U.S. oil inventories are projected to have fallen by 2.1 million barrels (bbl) from the previous week to about 6% below the five-year average after plunging 3.7 million bbl in the third week of November. Estimates range from a decrease of 3.5 million bbl to an increase of 2.3 million bbl.

Analysts said the likely decrease is partly because of another smaller-than-normal transfer of crude last week from the nation's Strategic Petroleum Reserve to the commercial side. The yearlong SPR sales by the U.S. government aim to boost supplies so as to reduce gasoline prices at the pump but is beginning to wind down.

The American Petroleum Institute will release its weekly inventory report 4:30 p.m. EST.

Gasoline stockpiles are expected to have increased by 500,000 bbl last week, with stocks of distillates seen rising by 200,000 bbl. Refinery use likely increased by 0.1% from the previous week to 94% of capacity.

Tuesday's rally in oil futures was underpinned by reports that protests across China's largest cities have lost steam amid heavy presence of police and armed forces as health authorities condemned "excessive COVID curbs." Local governments in Beijing and Shanghai said they would no longer require steel gates to block people or emergency personnel from entering apartment compounds where infections are found. There have also been reports that some COVID-19 restrictions are being lifted in Urumki, the epicenter of protests where a fire in a high-rise apartment building took the lives of 10 people as rescue teams were unable to reach the scene amid COVID blockades.

The minor concessions are a very small step in a mountain of strict zero-COVID policies that govern every move of each person in a system of rolling lockdowns. Authorities still failed to address public concerns over a lack of vaccine mandates or scrapping of quarantine system.

Personal mobility in China dropped to a seven-month low last week, according to private data, with China's fuel consumption already lagging 1 million bpd below its pre-COVID levels.

Retail and home sales in China fell sharply this year as consumers cut spending amid COVID uncertainty and lackluster government stimulus. Global demand for Chinese exports also declined compared to previous years as Europe is expected to enter into recession at some point next year and the U.S. economy is slowing under pressure from rising interest rates.

Goldman Sachs analysts believe that even before the protests China's potential growth "will be meaningfully lower than previously thought," adding that demonstrations now raise the risk of a "messy exit from zero-COVID policies with rising infections and social unrest."

At settlement, West Texas Intermediate futures for January delivery advanced $0.96 to $78.20 bbl, with January Brent futures on ICE slipping $0.16 to $83.03 bbl. Next-month delivery February Brent contract expanded its premium against the expiring contract to a $1.22 contango. December RBOB futures on NYMEX edged higher to $2.3321 gallon, with the January contract settling at $2.3321 gallon. December ULSD futures added $0.0805 to $3.2959 gallon and the next month contract gained to $3.2439, up $0.0923 in afternoon trading.

The January Brent, December RBOB and ULSD futures contracts expire Wednesday afternoon.

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

Liubov Georges