Oil Edges Up Ahead of U.S. Stocks Data

By Timothy Puko Features Dow Jones Newswires

Oil prices rallied back toward six-week highs Tuesday on a slate of factors, including a falling dollar and more momentum behind the idea that the worst of a longstanding glut may be past.

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U.S. crude for August delivery recently gained 41 cents, or 0.9%, to $46.43 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 49 cents, or 1%, to $48.91 a barrel on ICE Futures Europe.

It would be the 15th gain in 18 sessions for U.S. oil, a period that includes its longest winning streak in seven years. Gains so far Tuesday are nearly canceling out a rare retreat from Monday and intraday prices peaked within 40 cents of a high that dates back to June 7.

While oil is still nowhere near the $60 that many predicted for this time of year, analysts are saying that reversal in recent weeks could be a turning point bouncing off a new floor for prices. The International Energy Agency said last week it is expecting global demand to rise faster than expected, and there are signs exports and oversupply from some of the world's biggest producers are easing.

"The market is undergoing a positive psychological shift, with sentiment turning bullish as diminishing supplies and peak U.S. production taking hold," Peter Cardillo, chief market economist at First Standard Financial in New York, said in a note.

Brokers cited the dollar as another factor Tuesday after it fell sharply. That often raises the price of oil and other commodities traded in dollars by making them less expensive for traders who use other currencies. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of other currencies, recently fell 0.6% on new doubts about President Donald Trump's ability to pass a constructive agenda.

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Traders will also be watching for stockpile estimates coming from analysts and the industry group the American Petroleum Institute, due later Tuesday. The U.S. government releases its official data on Wednesday mornings.

S&P Global Platts estimates U.S. commercial crude stocks fell by 3 million barrels last week, and gasoline and distillates to have fallen by 500,000 and 700,000 barrels respectively. A drop in crude stocks would be the 12th decline in the last 14 weeks, one of major the catalysts for the summer rally.

Revived gasoline demand has been another, and its prices already rose to a new high Tuesday dating back to June 2. Gasoline futures recently gained 1.8%, to $1.584 a gallon.

"Strong demand has reduced the gasoline supply surplus appreciably during the past month in spite of stronger than normal refinery runs that have been boosting production," Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates said in a note. "A strengthening U.S. economy appears to be boosting commuter miles driven given near full employment."

On Tuesday, brokers also pointed to trading interest in new report on export cuts from Saudi Arabia. Consultant Petroleum Policy Intelligence told clients that the kingdom is considering reducing its exports by as much as 1 million barrels a day.

It would be the latest move as the kingdom struggles to cope with rising production from the U.S., Nigeria and Libya. That has undermined an effort from the Organization of the Petroleum Exporting Countries and other exporters to reduce world supply, and led to Saudi Arabia cutting back output even further than its allies in the deal. Saudi Arabia was already in the process of slashing its U.S. oil exports to a nearly three-decade low for this time of the year.

The kingdom is still considering several options and no final decision has been made, said Bill Farren-Price, Petroleum Policy Intelligence's founder. He cited sources inside and outside of OPEC.

"If this ever was confirmed by Saudi sources, it would certainly grab the market's attention," said Harry Tchilinguirian, oil strategist at BNP Paribas. "That figure is extremely important, and it's a big number...It's just something that seems a little unrealistic."

Diesel futures recently gained 1%, to $1.5138 a gallon.

Sarah McFarlane and Jenny W. Hsu contributed to this article

Write to Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

July 18, 2017 11:25 ET (15:25 GMT)