Brent Oil, Crude Oil, Gasoline, Diesel Oil & Natural Gas Diverging & Converging

Crude oil responded sharply to Tuesday nights API weekly inventory report gaining 11 points this morning after rallying as high at $61 during Tuesday’s trading session. This morning finds WTI trading at 61.12. Brent oil gained steadily on Tuesday but gave back a few cents in the Asian session to trade at 64.56. The American Petroleum Institute (API) forecast on Tuesday that U.S. commercial crude oil stocks fell by 3.2 million barrels last week, larger than analyst expectations of a 1.5-2.1 million barrel draw and the eighth straight week of declines. The U.S. Energy Information Administration will release official stockpile data later on Wednesday.

Oil prices have climbed on expectations of a further decline in US inventories and positive data in the Eurozone that could signal stronger demand. The petroleum market has recovered from lower levels despite a US dollar rally, “with stronger-than-expected Eurozone PMI and hopes that a Greek debt deal will be reached helping support that move higher,” according to Tim Evans of Citi Futures.

Gains were capped as the dollar hovered at its highest in over a week against a basket of major currencies early on Wednesday following reasonably strong U.S. data on Tuesday. A strong dollar makes commodities, including oil, priced in other currencies more expensive.

Bullish expectations for the Department of Energy’s petroleum report on Wednesday also lifted prices as analysts predicted US crude inventories fell an eighth straight week. The market is “looking for a draw of 1.3 to 1.5 million in storage for crude oil” and a decline of about half a million barrels in gasoline stockpiles, according to Bob Yawger of Mizuho Securities.

Oil prices rose this morning on hopes for stronger than expected U.S. crude demand, while doubts over reaching an agreement next week over Iran’s nuclear program eased oversupply concerns.

Reuter’s reported that there are roadblocks to an agreement next week between Iran and six world powers on Tehran’s nuclear program that would end sanctions and allow Iran to boost oil production.

That followed Tuesday’s decision by Iran’s parliament to pass a bill banning access for U.N. inspectors to its military sites and scientists. Also on Tuesday, Iran’s Supreme Leader Ayatollah Ali Khamenei ruled out freezing sensitive nuclear work for a long time after France and the five other world powers wanted Iran to halt parts of its nuclear program for at least 10 years as part of a deal to lift sanctions.

There’s always a chance an agreement could be dumped. June 30 is a self-imposed deadline, so it could be put off.

In other energy markets, Natural gas tumbled 11 points to 2.744 after gaining on Monday as weather turned warmer, only to fall as the forecast was revised to moderate for this time of year.  Temperatures may be mostly normal or below average in the eastern two-thirds of the U.S. from June 27 through July 6, Commodity Weather Group said. Marketed gas production will advance 5.7 percent from 2014 to a record 78.96 billion cubic feet a day, government estimates show.

Retail gasoline has surged by 25 percent this year, diesel prices have fallen by more than a quarter a gallon. The difference between the two is the smallest in almost six years and may all but disappear in two weeks’ time, according to Phil Flynn, senior market analyst at Price Futures Group. Retail gasoline has jumped almost 56 cents a gallon this year to average $2.788 a gallon this week, data compiled by motoring club AAA show. Diesel was down about 27 cents at $2.857 a gallon. Gasoline futures added 0.2 percent to $2.0815 a gallon in electronic trading on the New York Mercantile Exchange.