DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange swung between modest gains and losses on Tuesday under pressure from a strengthening U.S. dollar index that rallied on a solid jump in retail sales for the September-August period, bolstering expectations for economic growth in the fourth quarter, before fading gains.

U.S. retail sales climbed 0.7% in September after an upwardly revised 0.8% gain in August showed data released Tuesday morning from the U.S. Census Bureau. Economists projected a modest gain of 0.3% in the reviewed month, expecting persistent inflation and high interest rates to have throttled consumer spending. The fresh data, however, suggests consumption patterns by American households remained strong heading into the fourth quarter despite a slowdown in some pockets of the economy.

Strong consumer spending should support gasoline consumption, with driving demand having a close correlation with the labor market and the overall strength of the economy. But recent demand data from the U.S. Energy Information Administration might suggest overwise, with gasoline consumption hovering around 2008-2009 recessionary years.

Oil traders will be laser-focused on Wednesday's inventory figures for signs of any improvement in fuel consumption as the economy transitions into the final months of the year. The American Petroleum Institute will release its preliminary survey at 4:30 p.m. ET, followed by official data from the U.S. Energy Information Administration on Wednesday morning.

A consensus of analysts and traders surveyed by Wall Street revealed U.S. commercial crude stockpiles likely rose by 400,000 barrels (bbl) for the week ended Oct. 13, with expectations ranging from a decrease of 4 million bbl to an increase of 5 million bbl. Gasoline inventories are expected to have declined by 600,000 bbl and stocks of distillates are seen to have decreased by 1.2 million bbl. Refinery use likely edged down 0.1% from the previous week to 85.6% of capacity.

The oil complex has been caught between geopolitical tensions in the Middle East and the potential for the Biden administration to ease sanctions on Venezuelan crude oil exports. Tuesday's mixed price action in the oil complex follows multiple media reports suggesting the White House would soon announce a deal to remove all sanctions on Venezuelan crude exports in exchange for the restart of democratic processes in its political system.

Bearish on the surface, analysts are skeptical, however, the bold move would make a difference in global supply fundamentals, while having little impact on oil prices in the near-term. The Venezuelan oil industry has suffered years of underinvestment, mismanagement, and brain drain that will undermine its production capacities for years, according to Andy Lipow, president at Lipow Oil Associates, LLC.

The latest report from the Organization of Petroleum Exporting Countries (OPEC) pegged Venezuela's oil output at 733,000 barrels per day (bpd) in September, down from 758,000 in August, according to secondary sources. The two-month drop follows output of 772,000 bpd in July -- the highest production rate registered since early 2020. That is still a far cry from the peak of 3.453 million bpd recorded in December 1997.

At settlement, NYMEX West Texas Intermediate futures for November delivery posted no change at $86.66 bbl, while ICE Brent on ICE gained $0.25 to $89.90 bbl. NYMEX November ULSD futures added $0.0275 to $3.1767 gallon, while front-month RBOB futures gained $0.0115 to $2.2845 gallon.

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