An afternoon selloff pushed oil futures to settle just off session lows as economic growth concerns weighed on demand outlooks.
NYMEX product futures saw steep declines Monday. July ULSD settled down 2.99 cents at $1.7995/gal and July RBOB was 4.17 cents lower at $1.6908/gal at market close.
While the energy prices have come under pressure amid a US-China trade dispute that has dampened demand for oil products, expectations of gasoline and distillate inventory builds added outsized pressure to RBOB and ULSD futures. US distillate and gasoline stocks were both expected to have added 1 million barrels last week, an S&P Global Platts survey of analysts showed Monday.
A New York Federal Reserve report, released Monday, showed a sharp decline in regional business activity for June, adding to bearish sentiment. The Empire State Manufacturing Survey index plunged 26 points from May to minus 8.6 in June, the largest monthly decline on record and the first negative reading since October 2016.
The decline in New York Harbor ULSD pricing narrowed discounts to Midwest. The differential for Platts Chicago ULSD to NYMEX ULSD was assessed at minus 16.75 cents/gal to NYMEX ULSD, in from a nearly five-month low of minus 21.25 cents/gal on Friday.
Crude futures also tumbled Monday as weakened demand outlooks contributed to oversupply concerns.
ICE August Brent settled down $1.07 at $60.94/b and NYMEX July WTI was 58 cents lower at $51.93/b at market close.
US commercial crude supply last week was expected to dip 2 million barrels, Platts analysis showed.
The expected draw would snap three consecutive weeks of stock builds, but would fail to cull a budding supply overhang. The dip would push inventories to 8.53% above the five-year average of US Energy Information Administration data, the widest surplus to the average since mid-January. The latest EIA data showed US oil production averaged just below all-time record highs at 12.3 million b/d during the week that ended June 7.
Uncertainty regarding the outlook for a 1.2 million b/d production cut agreement between OPEC and its allies added further downward pressure on prices Monday. While a rollover of the deal, which expires at the end of June, is widely expected, OPEC, Russia and the nine other producers that comprise the so-called OPEC+ group appear so far unable to agree on a date for their next meeting.
Iranian oil minister Bijan Zanganeh said Monday that no deal has been reached to move the OPEC meeting to July 3-4 from June 25-26, despite last-minute lobbying by his Russian counterpart Alexander Novak. Zanganeh instead proposed holding the meetings July 10-12.
Saudi Arabia energy minister Khalid al-Falih Monday said he is "absolutely" confident the group will reach an agreement to extend oil production cuts that expire this month.
Falih told reporters in Tokyo he had "very constructive discussions" with Russian energy minister Alexander Novak during trips to Saint Petersburg and Moscow just before he traveled to Japan for the G20 energy meeting over the weekend.
