Oil rose toward $69 a barrel on Tuesday, lifted by a weaker dollar and an expected draw in U.S. crude stocks, but concerns that a major U.S. exchange will increase enforcement of position limits capped gains.
The CME Group, which runs NYMEX, has told traders and brokers of tighter enforcement of existing position limits on NYMEX, CME, and other exchanges as of September 14, raising the prospect of punishment for price manipulation.
U.S. crude for October delivery rose 6 cents to $68.92 a barrel by 0904 GMT (5:04 a.m. EDT), off an intra-day high of $69.23, while Brent lost 34 cents to $67.10. Trade in Brent was distorted by the expiry of the front-month contract at close of business on Tuesday.
We're consolidating after last week, said VTB Capital analyst Andrey Kryuchenkov, adding that crude oil was generally taking its cue from the dollar and equities.
Some oil traders said they interpreted the advisory as a CME warning that it could soon offer fewer exemptions for exceeding position limits.
But a source told Reuters on Monday that the CME will not boost enforcement of positions limits and that the advisory was routine.
There's a lot of talk about (the CME advisory), Kryuchenkov said. There are jitters there. It comes on top of the ongoing CFTC investigation and lawmakers pushing for tougher regulation. It all piles up.
The U.S. Commodity Futures Trading Commission aims to rein in speculation in energy and commodity trading, especially oil. Excessive speculation has been blamed for sending crude on a run to nearly $150 a barrel in 2008.
Kryuchenkov said a trade dispute between the United States and China, the world's first and second biggest fuel users, over a U.S. decision to impose special duties on Chinese tires was having little effect on the market.
Oil prices, which have risen from January's low of $32.70 to a high for the year of $75 in August, could struggle to breach the August high mark in coming weeks because of plentiful inventories, analysts said.
The American Petroleum Institute (API) industry group will release inventory data at 2030 GMT (4:30 a.m. EDT)on Tuesday, while the U.S. Energy Information Administration, a government agency, will issue its own report on Wednesday.
A preliminary Reuters poll forecast a 2.7-million-barrel draw in domestic crude stocks but a 1.5-million-barrel increase in distillate supplies and an 800,000-barrel build in gasoline stocks.
The most important thing here is obviously distillate stocks. We expect a colder than usual winter in the U.S., Kryuchenkov said. We might have decent demand in distillates, heating oil. Provided as well industrial demand picks up.
Distillates are used for heating oil and jet fuel.
Meanwhile, the dollar index, a measure of the U.S. unit against six other major currencies, was a touch weaker, but nevertheless off the one-year low of 76.457 points hit last week.
Analysts said the dollar was likely to remain week against the euro and the yen in coming months. A falling dollar makes dollar-denominated commodities cheaper to holders of other currencies.
(Additional reporting by Sambit Mohanty in Singapore; editing by Anthony Barker)