DTN Oil

WASHINGTON (DTN) -- Erasing earlier losses triggered by softer-than-expected trade data out of China, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session modestly higher after U.S. Energy Information Administration revised higher its global oil demand outlook through 2024.

In its Short-term Energy Outlook released Tuesday afternoon, EIA forecast stronger demand growth this year that would bring the global oil market into balance between the third quarter and first quarter of 2024. This would keep Brent crude prices in the range between $75 and $80 per barrel (bbl) for the remainder of the year.

"Although demand growth for liquid fuels faces downside risks through the end of 2024, we expect the seasonal rise in oil consumption and a drop in OPEC crude oil production to put some upward pressure on crude oil prices in the coming months," said EIA in its monthly report.

Global liquid fuels consumption is expected to increase by 1.6 million barrels per day (bpd) this year and by 1.7 million bpd in 2024, with most demand gains realized in Asian countries that are not part of the Organization for Economic Cooperation and Development, led by India and China.

Also on Tuesday, oil traders positioned ahead of the release of U.S. inventory data, beginning with the weekly survey from the American Petroleum Institute scheduled for 4:30 p.m. EDT, followed by official data from the EIA Wednesday morning. Analysts and traders estimate U.S. commercial oil stockpiles fell by 800,000 bbl for the week ended May 5, with estimates ranging from a decrease of 3 million bbl to an increase of 2.5 million bbl. That would follow a 1.3 million bbl decline in nationwide crude stockpiles reported in the final week of April.

The estimates for a weekly decline are partly due to expectations for strong crude oil exports and increased refinery activity and would come despite a Department of Energy announcement of another 2.9 million bbl transfer last week from the nation's Strategic Petroleum Reserve to the commercial side.

Gasoline inventories are also expected to have declined by 800,000 bbl in the reviewed period as demand is seen picking up momentum into the summer driving season.

Stocks of distillates, which is mostly diesel fuel, are expected to have decreased by 400,000 bbl. Refinery use likely increased by 0.5% from the previous week to a 91.2% utilization rate.

Earlier in the session, the oil complex came under selling pressure after China reported its crude imports plummeted 16% last month to 10.36 million bpd, while oil product exports fell a sharper 31% to the lowest level since August 2022. Both state-owned and independent refineries cut their crude imports in April.

The data raises questions about the health of China's demand recovery -- a narrative that has been driving the outlook for stronger oil consumption this year by the world's second-largest economy.

Ahead of this week's softer demand fundamentals, Saudi Aramco last week said it would lower the price at which it sells crude to Asia in June.

China's lower oil imports are in line with a broader weakness in overall trade volumes that came under pressure from geopolitical tensions with the United States and European Union. China's imports slumped 7.9% from the prior month in April, a much deeper contraction than a 0.5% decline expected by economists, while exports slowed from a double-digit expansion reported in March to 8.5%, showed data released overnight by China's General Administration of Customs. Trade between the U.S. and China fell 11.2% from a year earlier to $218 billion, while trade with the EU declined 3.5% year over year to $263 billion.

The data doesn't bode well for China's domestic consumption that had been outpacing gains from the production side of the economy post-COVID. China's manufacturing PMI fell into contraction last month for the first time since December 2022 when the economy was still under widespread lockdowns. Sub-indexes for new orders, new export orders and manufacturing employment were all below 50. The lopsided recovery reduced demand for commodities such as crude oil, iron ore, and copper -- imports of which dropped in April from the prior month.

At settlement, NYMEX West Texas Intermediate June futures added $0.55 to $73.71 per bbl, while ICE Brent July futures gained $0.43 per bbl to $77.44 per bbl. NYMEX RBOB June futures advanced $0.0183 to $2.4799 per gallon, and the front-month ULSD contract edged higher by $0.0125 to $2.3902 per gallon.

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