WASHINGTON, D.C. (DTN) - - New York Mercantile Exchange oil futures opened lower on Friday morning as the U.S. dollar gained ground against the euro on concerns over the Greek debt crisis, and Saudi Arabian Oil Minister Ali al-Naimi said the kingdom will produce more crude oil in the coming months if demand warrants.
The market is also awaiting for Baker Hughes’ weekly U.S. oil rigs report due later today, which is expected to show a 28th straight weekly decline in the rig count. U.S. oil production remains near a three-decade high at 9.6 million bpd despite the steep decline in working oil rigs, according to a recent report from the Energy Information Administration.
NYMEX July WTI crude futures opened Friday regular session trading down $1.00 at $59.45 bbl after inside trade. ICE August Brent futures opened $1.23 lower at $63.03 bbl, near a two-day low of $63.
In products trade, NYMEX July ULSD futures tumbled 4.12 cents to a $1.8740 bbl open, near a two-day low at $1.8732. NYMEX July RBOB futures opened 4.52 cents lower at $2.0810 gallon, off a better than one-week low at $$2.0640.
Naimi’s comments offered nothing new since the kingdom’s 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 United States to continue operating.
The Saudis convinced the Organization of Petroleum Exporting Countries to agree on the policy of maintaining its production ceiling at 30 million bbl for the next six months, although the cartel is currently producing 1.0 million bbl above its quota. Most of that excess supply is coming from Saudi Arabia.
Domestically, the EIA on Wednesday reported that crude oil stocks declined for the seventh straight week, down 2.7 million bbl to 467.9 million bbl during the week ended June 12. However, EIA's report also showed gasoline stocks unexpectedly increased by 460,000 bbl as demand fell by 424,000 bpd for the week. Crude oil stocks at the Cushing, Oklahoma, supply hub that is also the delivery location for the NYMEX WTI futures contract also posted a build of 100,000 bbl for the week, the first increase in the past eight weeks, which was viewed as bearish for WTI crude prices.
Meantime, fears over Greece have increased after Thursday's debt talks in Luxembourg attended by finance ministers from the eurozone failed. Athens is firmly opposed to demands for pension reform that would cut $2 billion from the Greek budget. Without a deal, 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.
A summit for 19 Eurozone leaders is now set for Monday, to further discuss the crisis, but many officials are now accepting of or are resigned to the prospect of a Greek exit.
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 firstname.lastname@example.org
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