Oil futures advance ahead of Fed rate call, inventory data

Further evidence of the economic slowdown could be found in US consumer confidence data released on Tuesday which showed the Americas feeling increasingly unhappy with the outlook for the economy and personal finances. The confidence index fell for the third consecutive month in July, slipping 2.7% more than expected to 95.7 from expectations for a reading of 96.8. The decline in confidence surprised some economists who thought falling gasoline prices, after hitting record highs in mid-June, could spark some economic optimism.

The International Monetary Fund on Tuesday lowered its growth projection for the United States from 1.4% this year to 2.3%, due to the decline in household purchasing power and the tightening of monetary policy. Globally, the Washington-based institute revised its outlook to 3.2% this year before slowing further to reach 2.9% GDP in 2023.

“The world could soon tip over to the brink of a recession,” said Jeff Kearns, editor of the IMF blog.

Separately, API data showed US crude oil commercial inventories fell 4 million barrels (bbl) last week from expectations of a 700,000 barrel draw. Gasoline inventories fell 1.1 million barrels from the previous week. Markets were expecting a smaller drawdown of 100,000 barrels. Distillate stocks also fell by 600,000 barrels in the week under review against calls for a 200,000 barrel increase. The U.S. Energy Information Administration will release its weekly inventory report at 10:30 a.m. EDT.

Underlying gains in the oil complex are lingering concerns over adequate gas supply in the European Union after Russia’s Gazprom cut gas shipments on key Nord Stream 1 pipeline to just 20% of capacity total. According to a statement from Italy’s ENI SpA, Gazprom’s actual gas deliveries fell to 27 million cubic meters on Wednesday from an expected 33 million cubic meters. It is now increasingly likely that the European Union will face an intense gas shortage this winter which could lead to gas rationing, analysts say. Prices for natural gas from the Dutch Title Transfer Facility jumped to more than 200 euros per megawatt hour, a new record high. That was more than 26% higher than Friday’s (July 22) close and about 780% higher than a year earlier. If Nord Stream 1 gas flows are completely cut off and the winter is colder than usual, gas storage in Europe could run out by the end of February, according to energy consultant Wood Mackenzie Ltd. .

Around 7:30 a.m. EDT, NYMEX September West Texas Intermediate futures climbed $1.16 to $96.14 a barrel, with ICE September Brent rallying $1.05 to $105.45 a barrel. NYMEX August RBOB futures jumped 4.40 cents to $3.3990 gallons, and August ULSD futures saw a gain of 4.59 cents to $3.6298 gallons.

Liubov Georges can be reached at liubov.georges@dtn.com