New York — Oil futures settled higher Monday, boosted by strength in equities.
ICE October Brent settled 39 cents higher at $76.21/b, while NYMEX October crude settled 12 cents higher at $68.84/b.
In refined products, September NYMEX ULSD settled 1.27 cents higher at $2.2149/gal, and September NYMEX RBOB settled 1.17 cents higher at $2.0896/gal.
News that the United States and Mexico reached a preliminary trade agreement gave the stock market a lift. Uncertainty over NAFTA re-negotiations and the US-China trade conflict have been causing some concern about economic growth, and thus oil demand growth.
Monday's agreement helped to ease some of those concerns, and put pressure on other US trade partners to come to the table, said Phil Flynn, a senior market analyst at Price Futures Group.
While China has not yet imposed a tariff on US crudes, Chinese refiners have stopped importing US barrels on the possibility of a tariff. But according to a Reuters report, China's Unipec will start buying US crude again in October.
"It is clear that despite reports of China putting tariffs on the US, the big players are going to buy US oil. Many thought that China would replace US oil with Iranian oil, but now it appears that Iran's best customer is going to use the US oil as leverage to get Iranian oil at a discount," Flynn said in a note.
US sanctions on Iran are due to kick in November 4, which is expected to remove up to 1 million b/d of crude from the market.
ANALYSTS LOOK FOR CRUDE STOCK DRAW
The market will be closely watching this week's American Petroleum Institute and US Energy Information Administration inventory data for direction.
Analysts polled by S&P Global Platts were mixed on US crude inventories, with some looking for a stock draw of 3 million barrels or more for the week ending August 24, and others expecting a slight build. On average, analysts were looking for a 1 million-barrel stock draw.
US refiners are expected to have kept runs high, encouraged by strong refining margins, which could draw on inventories. However, US crude imports may increase following the drop the prior week, while crude exports have been sluggish lately, which could give crude inventories a lift.
US crude exports on a four-week moving average the week ending August 17 at 1.48 million b/d were down from 2.4 million b/d the week ending July 6, EIA data shows.
Platts cFlow trade-flow software shows US crude exports last week at roughly 1.6 million b/d. While exports to Europe were steady, and exports to Latin America and the Caribbean increased, exports to Asia fell, the data showed.
Analysts were looking for US refinery runs to remain unchanged, and high at roughly 97% of capacity. The upcoming fall maintenance season will reduce runs, especially in the Midwest, where BP is due to bring down its 413,500 b/d Whiting, Indiana, refinery starting in September.
With refiners going strong, and increasing their distillate yields as they exit summer gasoline season, distillate stocks should continue to build. Analysts are looking for US distillate stocks to have risen 1.7 million barrels last week.
Distillate stocks have climbed from 115 million barrels the week ending June 8 to 130.84 million barrels, narrowing the deficit to the five-year average.
Analysts are looking for US gasoline stocks to have fallen by 160,000 barrels, which would fall in-line with seasonal trends.