WTI Declines on US Output Outlook; ULSD Falls on Sentiment

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- West Texas Intermediate (WTI) and ULSD futures on the New York Mercantile Exchange (NYMEX) and Brent on the Intercontinental Exchange moved lower Tuesday on an upward revision in the U.S. oil production outlook and an expected weekly increase in domestic commercial crude inventories, while ULSD dropped back on sour sentiment by small businesses.

Energy Information Administration (EIA) midday released its monthly Short-term Energy Outlook revising its U.S. crude production expectation for this year up 91,000 barrels per day (bpd) to 13.189 million bpd, and by 157,000 bpd in 2024 to 13.65 million bpd. EIA revised expected world oil production down 134,000 bpd to 102.164 million bpd for this year, outpacing the U.S. gain, namely on a lower output projection for the Organization of the Petroleum Exporting Countries, revised down 107,000 bpd to 26.548 million bpd.

EIA made upward revisions of 500,000 bpd and 400,000 bpd in global oil consumption for both 2024 and 2025 to 102.91 million bpd and 104.26 million bpd, respectively, but the adjustments were made because of revisions to its baseline assumptions. EIA revised higher by 800,000 bpd its 2022 demand assumption, undercutting the 2024 growth rate in global oil consumption.

"Most of this change reflects non-OECD consumption that is higher than we previously estimated," said EIA.

Annual world oil consumption growth for this year is now expected by EIA at 950,000 bpd, a slowdown from March when expectations were for year-on-year growth of about 1.4 million bpd. EIA still sees a tight world oil disposition this year, with demand outpacing production in the second quarter by 900,000 bpd, leading to inventory drawdowns. Tight gasoline supply expectations boosted RBOB futures on the session.

NYMEX May WTI futures settled down $1.20 at $85.23 a barrel (bbl), and ICE June Brent ended the session $0.96 lower at $89.42 bbl -- the first settlement below $90 bbl since April 3. NYMEX May RBOB futures edged $0.0070 higher to a $2.7556 gallon settlement.

NYMEX May ULSD futures settled Tuesday's session $0.0517 lower at $2.6770, breaking below retracement support. Undercutting the ULSD contract was anxiety by small business operators, with sentiment by the business group in March the weakest in more than 11 years.

"Small business optimism has reached the lowest level since 2012 as owners continue to manage numerous economic headwinds," said Bill Dunkelberg, chief economist of the National Federation of Independent Business. "Inflation has once again been reported as the top business problem on Main Street and the labor market has only eased slightly."

Brian L. Milne can be reached at brian.milne@dtn.com.

Brian Milne