Oil Futures Gain Amid Consolidation

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced Monday in consolidation trade, fading from intraday highs with selling in major equity indices as investors question if a U.S.-China trade deal would do enough to reinvigorate a sagging world economy.

Oil futures held below recent multi-month highs on the second trading session for March despite wire service surveys showing crude production by the Organization of the Petroleum Exporting Countries declined again in February. A Bloomberg survey determined February OPEC crude production at 30.5 million bpd and a Reuters survey at 30.68 million bpd last month, down from January when OPEC, citing secondary sources, reported output at a 30.806 million bpd 46-month low. OPEC will release its estimates on March 14.

The output decline aligns with a six-month production agreement with non-OPEC oil producers through the end of June, with an increasing likelihood the OPEC+ agreement will be extended through year's end when OPEC meets in mid-April.

Oil futures faded from highs even though reports indicate the United States and China are closing in on a trade agreement, with an accord potentially reached near month's end. The Wall Street Journal reported U.S. President Donald Trump and Chinese President Xi Jinping could meet around March 27 in Florida to finalize a bilateral trade agreement. Trump previously said a meeting between the two leaders was a condition for a deal to be reached.

News of the progress in talks comes a day ahead of the kickoff to China's National People's Congress meeting, which runs from Tuesday through March 15. Reports suggest China would announce economic stimulus efforts to boost growth, with manufacturing in the world's second largest economy contracting for a third consecutive month in February. China will announce its annualized growth target for this year, which some estimate will be lowered from 6.5% to 6.0%.

U.S. equities were lower in late afternoon trade, with the Dow Jones Industrial Average back below 26,000, sliding more than 250 points on the session. The U.S. dollar strengthened to a nearly two-week high in index trading, boosted by the prospect of a U.S.-China trade deal.

At settlement, NYMEX April West Texas Intermediate futures were up $0.79 at $56.59 bbl and ICE May Brent $0.60 higher at $65.67 bbl. NYMEX April ULSD futures were $0.0133 up with a $2.0143 gallon settlement, and April RBOB futures moved $0.0187 higher to settle at $1.7490 gallon.

Brian L. Milne can be reached at brian.milne@dtn.com

(BAS)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.