WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures were on the defensive in pre-weekend trade, ending lower Friday afternoon on the strength of the dollar amid ongoing Greek debt drama and on concerns about a glut of supply spurred by comments from Saudi Arabia.
The oil futures complex has had a whipsaw move in recent days and posted moderate losses for the week.
Saudi Arabian Oil Minister Ali al-Naimi said the kingdom will produce more crude oil in the coming months to meet any incremental demand. That comment revived concerns about high oil production by the United States and members of the Organization of Petroleum Exporting Countries. OPEC is producing 1.0 million bpd above its agreed ceiling of 30 million bpd.
“Although only the latest indication that Saudi Arabia is competing for market share, we see the Saudi stance as bearish pressure on those betting on reduced US drilling to rebalance the market quickly,” said analyst Tim Evans at Citi Futures in New York. “July WTI crude oil futures expire on Monday, with risk of increased volatility related to thinning volume and open interest.”
Oil services firm Baker Hughes' weekly U.S. oil rigs report released today showed a 28th straight weekly decline in the rig count, with operating rigs down two to a 12-year low of 857 for the week-ended June 19. Despite the 60% drop in active rigs since last year, domestic oil production remains near a three-decade high at 9.6 million bpd, the Energy Information Administration reported recently.
NYMEX July WTI crude futures settled down 84 cents at $59.61 bbl, off a two-day low of $58.88 while down 35 cents on the week. ICE August Brent futures settled $1.24 lower at $63.02 bbl, off a four-day low of $62.34 while down 81 cents for the week.
In products trade, NYMEX July ULSD futures tumbled 4.83 cents to a $1.8669 bbl settlement, off a better than one-week low at $1.8538 and down 2.23 cents for the week. The NYMEX July RBOB futures contract plunged 5.15 cents to $2.0586 gallon at settlement, off a better than one-week low at $2.0381 while down 6.25 cents for the week.
On Wall Street, U.S. equities were lower after the Greek crisis spurred risk-off trade while the dollar rebounded from Thursday’s one-month low to trade at a two-day high vs. the euro. Ahead of Monday’s eurozone leaders’ meeting to find a breakthrough on Greece, the European Central Bank Friday threw a lifeline to Greek banks by increasing emergency funding after savers pulled out 1.2 billion euros in a single day.
Many European officials are resigned to the prospect of a Greek exit. Athens is firmly opposed to demands for pension reform that would cut $2 billion from the Greek budget. If there’s no deal on Monday, Greece will default on its debt at the end of June, which could trigger an exit from the euro and a knock-on effect on the regional economy and demand for oil.
Naimi’s comments Thursday offered nothing new since Saudi oil production increased by 25,000 bpd in May to a record 10.33 million bpd, underscoring the Saudi strategy to keep supplies flowing to maintain market share and drive prices down to make it economically difficult for high-cost oil shale producers in the U.S. to continue operating.
The Saudis convinced OPEC to agree on the policy of keeping supplies flowing freely for the next six months, with most of that excess supply coming from Saudi Arabia, Iraq and United Arab Emirates.
On the geopolitical front, the market is beginning to focus on a potential Iran nuclear deal at the end of the June that could lead to more oil supply hitting the market, which is bearish for oil prices.
George Orwel can be reached at email@example.com
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