Futures Movers: Oil tries to stretch gains to a third session ahead of U.S. inventory reports

Crude-oil futures attempted to extend a winning streak to three sessions Tuesday as investors maintained a mostly bullish bent on prices following signs of receding output among major oil producers across the globe. A recent bout of weakness in the dollar also has helped to lift dollar-pegged commodities in recent trade.

West Texas Intermediate crude for October delivery CLV8, +0.01%  on the New York Mercantile Exchange added 6 cents, or 0.1%, to reach $68.33 a barrel, a day after notching the highest finish for a front-month contract since Aug. 7, FactSet data show. October Brent crude LCOV8, +0.52% the global benchmark, added 47 cents, or 0.6%, to $76.68 a barrel on ICE Futures Europe, marking its highest for a front-month contract since July 10 and outperforming the U.S. benchmark by a wide margin.

Renewed U.S. sanctions on Iran and supply disruptions in Libya and Venezuela have supported oil prices lately, amid data showing growing output from major producers including OPEC member Saudi Arabia and non-OPEC producer Russia. U.S. sanctions on oil exports go into effect in November, with investors estimating more than 1 million barrels daily being taken off line.

However, some market participants estimate that Saudi Arabia, the world’s swing producer and de facto leader of the Organization of the Petroleum Exporting Countries, could offset any Iranian shortfalls, which would push prices higher, said Greg Sharenow, portfolio manager at Pimco. “I believe that Saudi will adjust output and exports to meet client needs. They won’t force oil onto markets, nor will they decline client demands,” he said in a recent note.

On Monday, a conference call hosted by the Organization of the Petroleum Exporting Countries’s Joint Ministerial Monitoring Committee indicated that countries participating in the oil production-cut pact that was implemented at the start of 2017 reduced production by 9% more than required in July, according to report from Reuters. That’s down from reported overcompliance of 121% in June and 147% in May.

Looking ahead, market participants await data late Tuesday on U.S. inventories from the American Petroleum Institute after it showed that U.S. supplies fell by a greater-than-expected 5.2 million barrels for the week ended Aug. 17, setting the stage for last week’s crude rally. A more closely watched U.S. Energy Information Administration report is due Wednesday. Last week, that report helped to confirm the sharpl API inventory decline.

Some industry experts are predicting inventory reductions to persist, albeit at more moderate levels.

“EIA crude oil storage will most likely post a significant draw on an increase in exports, largely as a function of an expanding Brent/WTI,” wrote Robert Yawger, director of energy at Mizuho U.S.A., in a Tuesday research note.

Some slack in the U.S. dollar offered a modest lift to oil futures as well, with the popular ICE U.S. Dollar Index DXY, -0.09%  off 0.1%, contributing to a 0.5% decline thus far since Tuesday. A softening dollar can make commodities priced in the unit comparatively more attractive to buyers using other currencies.

In other energy trade, September gasoline RBU8, +0.20% rose less than 0.1% to about $2.090 a gallon, with that contract expiring on Friday. The most-active October gasoline contract RBV8, +0.18%  was up 0.1% at $1.988 a gallon. Meanwhile, September heating oil HOU8, +0.48% added 0.3% to $2.222 a gallon, while the most-active October contract is up 0.3% at $2.227 a gallon. The September heating oil contract also expires on Friday.

September natural gas NGU18, -0.35%  rose 0.2% to $2.881 per million British thermal units, with that contract due to expire at Wednesday’s settlement. Natural-gas futures for October delivery NGV18, -0.49%  were trading flat at $2.869 per million British thermal units.

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