DTN Oil

WASHINGTON, D.C. (DTN) -– West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange resumed their rally in the afternoon session Tuesday propelled by market expectations for U.S. Energy Information Administration data to show commercial crude-oil inventories declined again last week as investors in financial markets pare back bets on U.S. recession this year.

The consensus of analysts and traders surveyed by the Wall Street Journal showed commercial crude-oil inventories in the U.S. decreased by 2.2 million bbl from the previous week. Forecasters were nearly unanimous, with nine anticipating a decrease and just one forecasting a week-on-week increase. If realized, that would mark the second weekly drawdown from U.S. commercial stockpiles that currently stand 1% above the five-year average. Meanwhile, gasoline inventories are also seen decreasing by 1.7 million bbl from the previous week, while stocks of distillates are expected to fall by 600,000 bbl. Refinery runs are forecasted to rise by 0.1% from the previous week to 94.4%.

Forecasts for across-the-board draws from U.S. petroleum inventories come as investors aggressively pare back bets on U.S. recession this year, with the labor market largely seen holding on to post-pandemic gains. The consumer confidence index, released this morning from the Conference Board, revealed Americans feel more optimistic about the economy than at any point since July 2021, reflecting improvement in both current conditions and expectations. "Headline confidence appears to have broken out of the sideways trend that prevailed for much of the last year. Greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000," said Dana Peterson, Chief Economist at The Conference Board.

Against this backdrop, the Federal Open Market Committee is set to raise interest rates again when it wraps-up policy meeting on Wednesday at 2 PM ET, followed by the press-conference held by the Chairman Jerome Powell 30 minutes later.

Markets remain largely unconvinced that the Federal Reserve will follow through with further rate increases in the final months of the year after delivering a 25-basis point hike on Wednesday.

Elsewhere, economic data released showed growth in the Eurozone and China has mostly weakened at the start of the third quarter, stymied by a manufacturing recession and weak labor market. In China, the government is struggling to reinvigorate a lopsided recovery, with the latest measures announced by the Politburo seen as targeted but insufficient to spur domestic demand. Last week, all major investment banks revised lower their forecasts for China's growth in the second half of the year. "China's economy is facing new difficulties and challenges, which mainly arise from insufficient domestic demand, difficulties in the operation of some enterprises, risks and hidden dangers in key areas, as well as a grim and complex external environment," the state news agency Xinhua quoted the Politburo after a meeting chaired by President Xi Jinping.

In the Eurozone, business activity fell into deeper contraction this summer plagued by a sharper downturn in industrial output and a sustained slowdown in the services sector. The German manufacturing sector, in particular, has been hit hard, with the Purchasing Managers Index falling below the 40- mark for the first time since COVID-19 lockdowns in April 2020. "This is a bad start to the third quarter for the Germany's economy. Over the last few months, we have seen a jaw dropping fall in both new orders and backlogs of work, which are now declining at their fastest rates since initial covid wave at the start of 2020," said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commenting on the data.

At settlement, WTI August futures on the NYMEX added $0.89 bbl to $79.63 bbl and international benchmark Brent for September delivery advanced to $83.64 bbl, up by $0.90 bbl on a session. Moving in the opposite direction, RBOB August futures on NYMEX fell 0.0418 cts to $2.8533 a gallon and ULSD futures gained to $2.7776 a gallon, up 0.0071cts a gallon in afternoon trading.

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