Market Report & Analysis for 7/4/2019 Morning Edition

by | Jul 3, 2019 | EMI, Fuels & Markets, FutureRack, Industry News

Morning Market Overview

Oil Futures Edge Higher on Large Crude Draw, OPEC+ Cuts WASHINGTON, D.C. (DTN)

New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures inched higher in early trade Wednesday following steep losses Tuesday, bolstered by a larger-than-expected draw in U.S. commercial crude inventories, while continued supply cuts from Organization of the Petroleum Exporting Countries and allies underpin market support.

At 9 AM ET, NYMEX August West Texas Intermediate was up $0.30 at $56.55 bbl, with ICE September Brent $0.60 higher at $63 bbl. NYMEX August ULSD futures were 0.7cts higher near $1.8930 gallon, with the August RBOB contract 0.85cts higher near $1.8790 gallon. American Petroleum Institute reported a sizable 5 million bbl drawdown in domestic crude stockpiles during the week end June 28, nearly twice calls for a 2.6 million bbl draw.

In refined products, data was mixed showing gasoline stocks declined 837,000 bbl, below an expected 2.5 million bbl drop, while distillate inventories slid 1.7 million bbl versus an expected decline of 600,000 bbl. Energy Information Administration will publish its weekly supply statistics for last week of June at 10:30 AM ET. WTI and Brent settled at two-week lows Tuesday, even as OPEC and 10 oil producing countries outside the block agreed to roll over 1.2 million bpd in reduced production into the first quarter of 2020. Oil markets grew increasingly mute to the extended OPEC+ supply restriction, as concern over a slowing global economy and its effect on fuel demand outweighed the group’s efforts to prop up oil prices.

A slew of bearish economic reports from earlier this week triggered aggressive selling in oil futures on Tuesday, sending WTI 4.8% lower at the market close. Barclays expects oil demand to grow at the slowest pace in eight years in 2019, gaining less than 1 million bpd, while also revising lower the price of Brent, the international benchmark, to $60 bbl for the current year.

Meanwhile, International Energy Agency and Energy Information Administration both downgraded their demand forecasts in the second quarter, with updated estimates due to be published next week. Against the backdrop of weak macro signals, U.S. equities continued to draw support on Tuesday from the agreement between the United States and China to halt new tariffs, with S&P 500 notching its second session of record gains.

Market participants will be looking ahead to the government jobs report due on Friday, which could be potentially the key driver for the markets in the coming weeks. Markets expect the U.S. economy to have gained 160,000 new jobs in June. U.S. dollar strengthen to 96.280 in early index trading on Wednesday.