The Oil Market Posted an Inside Trading Day on Tuesday After the Market Retraced Most of its Previous Losses

Recap:   The oil market posted an inside trading day on Tuesday after the market retraced most of its previous losses, breaking a three-day slide. The market posted a low of $67.15 in overnight trading before it bounced higher after the market seemed oversold from its previous losses. The market rallied over $2.70 as it posted a high of $69.83 following the release of the inflation data, which showed the Consumer Price Index increased by 0.1% in May. The data showed the gains in consumer prices slowed more than expected causing traders to increase their expectations of the Federal Reserve deciding on Wednesday forego an interest rate hike. However, the market’s gains were limited and it settled in a sideways trading range ahead of the weekly oil inventory reports and the Fed decision. The July WTI contract settled up $2.30 at $69.42 and the August Brent contract settled up $2.45 at $74.29. The product markets also ended the session sharply higher, with the heating oil market settling up 8.64 cents at $2.3955 and the RB market settling up 7.53 cents at $2.5579.

Market Analysis:  The oil market will likely remain supported as the weekly petroleum stock reports are expected to show draws in crude stocks of over 1 million barrels and ahead of the Fed decision on interest rates on Wednesday afternoon. Resistance is seen at its high of $69.83, $69.96, $70.33, $70.93, $71.77 and $71.90. Further upside is seen at $73.28 and $75.06. The market is seen finding support at its low of $67.15, $66.80 and $63.64.

Fundamental News:  OPEC left its 2023 global oil demand growth forecast steady for a fourth consecutive month, although the producer group warned that the world economy faced increasing uncertainty and slower growth in the second half of the year. In its monthly report, OPEC said world oil demand in 2023 will increase by 2.35 million bpd or 2.4%. This was virtually unchanged from 2.33 million bpd forecast last month. Chinese oil demand is now expected to increase by 840,000 bpd, up from the 800,000 bpd forecast last month, adding to a recovery after strict COVID-19 containment measures were scrapped. The report showed that OPEC's oil production fell in May, reflecting the impact of earlier output cuts pledged by OPEC+ as well as some unplanned outages. OPEC said its May output fell by 464,000 bpd to 28.06 million bpd as voluntary cuts, promised by Saudi Arabia and other members, took effect.

Barclays said it remains constructive on oil prices. It expects non-OPEC+ supply growth to slow significantly over the coming quarters and added that a lot of incremental weakness in demand is likely already priced in. It said OPEC+ will likely remain proactive with the primary goal of avoiding a sustained surplus. It forecast U.S. oil output will increase by 700,000 bpd in the fourth quarter and by 300,000 bpd in 2024, with the Permian Basin still driving most of the gains.  

Colonial Pipeline Co is allocating space for Cycle 36 on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina. The current allocation is for the pipeline segment north of Collins, Mississippi.

The U.S. Environmental Protection Agency is seeking a short-term delay to a final rule on biofuel blending mandates for the years 2023-2025. The EPA was set to issue a final rule on Wednesday, but now will likely issue it next week. Under the U.S. Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the nation's fuel mix or buy tradable credits from those that do.

Early Market Call - as of 8:45 AM EDT

WTI - July $70.12, up 70 cents

RBOB - July $2.5670,  up 91 points