CRANBURY, N.J. (DTN) -- The nearest to delivery West Texas Intermediate crude futures contract on the New York Mercantile Exchange and the Brent crude contract on the IntercontinentalExchange plumbed new lows overnight, as a global market rebalance between supply and demand isn't expected to late 2016 at the earliest.
Growing distillate supply in the United States, tallied at 27.7 million bbl above the comparable year-ago period on Dec. 4 by the Energy Information Administration, amid mild winter weather and slack growth in manufacturing pressed nearest delivered NYMEX ULSD futures to its lowest point in 11-1/2 years overnight.
Strong gasoline demand amid low street prices has somewhat muzzled the drop in January RBOB futures on NYMEX, with the contract holding above last week's $1.1956 gallon nearly seven-year low on the spot continuation chart.
The commodities were down at the 9:00 AM ET start to regular trade, but pared their declines.
At 9:00 AM ET, NYMEX January WTI crude futures were down 13cts at $35.49 bbl, edging off a $34.53 near seven-year low on the spot continuation chart. Technical support for the nearby contract is found at the $33.55 low from February 2009 and again at the December 2008 low of $32.40 bbl.
On ICE, January Brent crude futures were down 60cts at $37.33 bbl, moving off a $36.33 seven-year low on the spot continuation chart. Support is found at the $36.20 low from December 2008 and again at just below $36.00 and near $34.50 bbl.
The January Brent contract expires at Wednesday's (12/16) close to regular session trading
NYMEX January ULSD futures sunk to a $1.0874 gallon low overnight—the lowest trade since July 2004, paring the decline to $1.1212 gallon at 9:00 AM ET, down 2.44cts. The contract has price support near $1.0460 and at the July 2004 low of $1.0120 gallon.
NYMEX January RBOB futures were down 3.53cts at $1.2462 gallon at 9:00 AM ET. The contract has technical support just below $1.20 gallon at last week's low and again at the $1.1575 gallon low from February 2009.
In its final Oil Market Report of the year released Friday (12/11), the Paris-based 29-country member International Energy Agency said global oil supply would continue to build through the fourth quarter 2016, projecting another 300 million bbl of oil to be added to inventory between now and then as sanctions relief for Iran prompts the member of the Organization of Petroleum Exporting Countries to ramp up exports.
The market also learned late last week that OPEC crude production reached a three-year high of 31.7 million bpd in November.
Instead of defending a higher oil price through production cuts, the producer group adopted a new policy in November 2014 of defending market share amid the rapid rise in U.S. tight oil production. The Saudi-led strategy was reaffirmed Dec. 4 when members were unable to agree to production cuts, essentially shelving its previous 30.0 million bpd quota and acknowledging output at current rates.
The pump-at-all costs strategy is aimed at maintaining market share and knocking U.S. tight oil production out of the market, which IEA said Friday appears to be working. IEA highlighted a steep decline in non-OPEC production growth from 2.2 million bpd in starting 2015 to less than 300,000 bpd in November.
U.S. oil prices are also under pressure from a stronger U.S. dollar, which has an inverse relationship with domestic oil values. The stronger dollar comes ahead of this week's Federal Open market Committee meeting Tuesday and Wednesday, with the Fed largely expected to hike the important federal funds rate for the first time in 10 years from near zero, where it has held since December 2008.
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