DTN Oil

WASHINGTON, D.C. (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange swung between sharp gains and losses Tuesday to settle the session higher. Investors balanced concerns over rising interest rates and persistent inflation across major global economies against tight supply fundamentals exacerbated by extended production curbs from the OPEC+ alliance.

OPEC+ Joint Ministerial Monitoring Committee will hold its monthly meeting Wednesday to assess market fundamentals and recommend any policy changes if needed. A consensus of analysts and traders call for OPEC+ leaders Saudi Arabia and Russia to hold their production targets unchanged after announcing Sept. 5 a three-month extension to 1.3 million bpd in output and export curbs. It is plausible, however, that Saudi officials could hint they would again extend a 1 million bpd production cut, which first took effect in July, into early 2024 to backstop the slide of oil prices.

In recent sessions, oil futures came under selling pressure from a combination of a stronger U.S. dollar and production growth outside of OPEC+ coalition.

The greenback is currently trading at the highest level in nearly a year at 106.719 against a basket of foreign currencies following Monday's release of U.S. manufacturing index. At 49%, the ISM manufacturing index improved for the third straight month in September to stand at the highest level since November 2022, with both employment and new orders categories showing marked month-on-month improvement. The fresh data, however, reinforced the narrative of "higher-for-longer" in U.S. interest rates after several Federal Reserve officials signaled they are prepared to raise interest rates again this year.

Cleveland Fed Bank President Loretta Mester said Monday that one more interest rate hike of 25 basis points is well needed this year to ensure inflation is easing towards its 2% target.

"Interest rates should remain high for long enough until the central bank assesses the impact of policy-tightening already in place," Mester added.

Supporting this view, Fed Governor Michelle Bowman projected interest rates would need to go up towards a 5.5%-5.75% target range by year-end if progress in lowering inflation slows.

Separately, oil traders also positioned ahead of a weekly inventory survey from the American Petroleum Institute scheduled for a 4:30 p.m. (ET) release, followed by official data from the U.S. Energy Information Administration Wednesday morning.

A consensus of analysts surveyed by the Wall Street Journal revealed U.S. commercial crude oil inventories likely remained unchanged at around 416.3 million bbl for the week ended Sept. 29. Traders will closely monitor inventory levels at the Cushing storage hub, the delivery point for the WTI contract, which fell to their lowest since July 2022, according to the most recent EIA data.

Gasoline stockpiles are expected to have risen by 300,000 bbl from the previous week, according to analysts, while stocks of distillates, which are mostly diesel fuel, are expected to decrease by 400,000 bbl from the previous week. Refinery run rates likely fell by 0.3% in the reviewed to 89.2% of capacity.

On the session, WTI November futures on NYMEX added $0.41 to settle at $89.23 bbl, reversing off a $87.76 three-week intrasession low. The international benchmark Brent contract for December delivery settled the session at $90.92 bbl, up $0.21. Both crude benchmarks lost more than 2% in value on Monday. NYMEX November ULSD futures dropped back $0.0271 gallon to settle at $3.1954 gallon and front-month RBOB futures retreated $0.0521 gallon to $2.3601 gallon.

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