DTN Oil Update
Oil Futures Mixed Despite High Demand Outlook
HOUSTON (DTN) -- Oil futures showed mixed fortunes on Monday and reversed the upward trend seen in the last six trading sessions, despite reports of limited supplies driven by a drop in inventory levels last week and high demand anticipated due to severe cold weather.
The February NYMEX WTI futures contract fell by $0.52 to $73.44 bbl, while the front-month ICE Brent futures contract dropped by $0.28 to $76.23 bbl. The RBOB futures contract for February delivery fell by $0.0215 to $2.0322 gallon and the front-month ULSD futures contract edged up by $0.0090 to $2.3568 gallon.
As the oil futures market returned to normal activities Monday after the year-end holidays and participants focused its attention on the transition of a new government in the U.S., the front-month NYMEX WTI, ICE Brent and RBOB futures contracts traded lower, while in the opposite direction, ULSD futures rose.
The oil futures dipped also despite a weaker U.S. Dollar Index, which edged down by 0.723 to 108.905 against a basket of foreign currencies.
The drop was attributed to a report of the Washington Post suggesting that incoming President-elect Donald Trump's administration was exploring tariff plans "that would pare back the most sweeping elements of Trump's presidential campaign." But despite Trump denying the Washington Post report a few hours later, the U.S. Dollar Index continued moving lower compared to other competing currencies.
Trump has threatened to impose 60% trade tariffs on China's imports, and tariffs of 25% on imports from Mexico and Canada, its main trade partners, which are expected to have negative effects on U.S. consumers.
Separately, President Joe Biden announced Monday his decision to ban new offshore oil and gas drilling in most U.S. coastal waters, weeks before Trump inaugurates his second term as president of the United States on Jan. 20.
Biden seeks to protect more than 625 million acres of federal waters, which is expected to block Trump's plans to boost oil production through an increasing drilling activity.
The bearish tone in the oil futures market seemed to ignore the expectations of higher demand for heating oil resulting from a polar vortex, which is expected to cause major winter storms across the U.S. in the coming days.
Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com
