U.S. crude oil futures ended lower on Tuesday on book-squaring and crack-spread trading
ahead of Wednesday's government inventory report and news of an expected quick restart for a shut Canada-to-U.S. crude pipeline.
Front month crude futures earlier rose above $64 on supportive news of a shut Canada-to-U.S. crude pipeline and a restart of a Valero refinery in Texas.
But just before the market closed, pipeline operator Enbridge said that the ruptured line would be restarted in 24 hours, sparking more minute selling.
Gasoline prices tumbled, losing technical support and triggering sell stops, traders said.
Gasoline's decline came even though Wednesday's inventory report from the Energy Information Administration was expected to show the 10th consecutive weekly draw on gasoline stocks.
Heating oil futures also slid, losing ground technically even as forecasts called for a small stock drawdown.
"You're seeing an unwinding of crack spreads," said Mike Fitzpatrick, vice president, energy risk management, at Fimat USA, commenting on weak products futures.
"The Brent is closing the spread with WTI and the potential for Forcados production coming back probably has a lot to do with that."
On the New York Mercantile Exchange, May crude settled down 51 cents, or 0.8%, at $63.10 a barrel, after trading from $63.05 to $64.64. Options on the contract expired at the close; the contract itself expires on Friday.
The actively traded NYMEX June crude finished $1.21 or 1.8% lower at $64.46.
In London, June Brent crude fell $1.32, or 1.9%, at $65.93 a barrel, trading from $65.80 to $67.84.
Anticipation that Shell will restart the Forcados field in Nigeria helped push Brent lower on Monday and limit gains on Tuesday, according to traders.
NYMEX May RBOB gasoline fell back, breaching support at $2.10. It settled 5.99 cents lower, or 2.8 percent, at $2.0558 a gallon, having traded $2.05 to $2.1444 earlier.
The RBOB crack spread dropped to $23.24 after ending at $25.72 on Monday.
NYMEX May heating oil dropped 6.15 cents, or 3.3%, to $1.7978 a gallon, trading $1.795 to $1.8771. Technical support fell at $1.85.
The heating oil crack spread ended at $12.41, following a $14.57 close on Monday.
An expanded analysts' Reuters poll ahead of Wednesday's inventory data showed an average forecast for a 2.1 million barrel draw in gasoline stocks and a 400,000 barrel drop in distillates, which include heating oil and diesel fuel.
Crude stocks were expected to show an average build of 500,000 barrels while refinery runs were forecast to be 0.3% higher, on average, to 88.7% of capacity.
Enbridge said on Tuesday its ruptured 490,000 barrel a day Line 3, which carries Canadian oil to the U.S. Midwest, would be back in full service by midday, Mountain time, on Wednesday.
The line, which sprung a leak east of Regina, Saskatchewan, on Sunday, would return to service within 24 hours, a company spokesman said. Earlier on Tuesday Enbridge could not confirm a restart time for the line.
Enbridge is putting other crude on the line at its Cromer, Manitoba, terminal, downstream from the leak, but it is running at just 40% of normal capacity.
Valero Energy said Monday it had successfully restarted one crude unit at a 29,000 barrel-per-day naphtha reformer at its McKee, Texas, refinery.
The 170,000-bpd refinery was shut Feb. 16 after a fire and is a key user of NYMEX benchmark West Texas Intermediate from the Cushing, Oklahoma, delivery point.
On Tuesday, Valero shut several units at its 190,000-bpd St. Charles, Louisiana, refinery for work expected to take five days, traders said Tuesday.
A Valero spokesman said the work was planned and that because there was no material impact on production, it was not on Valero's list of scheduled refinery maintenance.