Oil Ends Shallowly Mixed Friday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended shallowly mixed with an upside bias Friday afternoon, as geopolitical risks stoked by the terrorist slaughter of tourists in Tunisia and decapitation of a gas plant worker in France offset the impact of a stronger dollar and worries over a potential Greek debt default next week that could trigger turmoil for the eurozone economy.

The markets also kept a watchful eye on headline news related to oil supply and demand fundamentals, with the clock ticking on Iranian nuclear talks that was initially set to end with a permanent deal on June 30 but is now likely to pass without a deal. Baker Hughes this afternoon reported rigs operating in the United States increased two during the week ended Friday, although rigs drilling for oil fell for the 29th consecutive week, edging down three to 628.

In addition, “we see some book-squaring ahead of the end of the quarter, which may entail some further long liquidation in our view,” said analyst Tim Evans at Citi Futures.

The NYMEX August WTI contract settled down 7 cents at $59.63 bbl, near a two-week spot low of $58.76 while down 2 cents for the week. ICE August Brent futures settled 6 cents higher at $63.26 bbl, near a four-day low of $62.50 while up 24 cents from prior Friday. The Brent premium over WTI widened 13 cents to $3.63 bbl at the close.

In products trade, the NYMEX July ULSD futures contract was little changed, nudging up 0.05 cents to a $1.8628 settlement and off a four-day low at $1.8487 gallon while down 0.4 cents for the week. NYMEX July RBOB futures settled up 1.17 cents to $2.0485 gallon after inside trade while down 1.0 cents for the week.

On Wall Street, U.S. equities were mixed while the dollar rose to a three-day high versus the euro, as stalled Greek debt talks discouraged investors from making any big moves.

Friday was a day of terror in Europe, North Africa and the Middle East that elevated the risk premium and stirred a pre-weekend short covering rally. It started with an Islamist terrorist attack on a U.S.-owned gas plant near Lyon in southeast France that left one person decapitated and two others injured.

Then, a gunman burst into a Tunisia resort and murdered 37 vacationers, most of them tourists from France and Britain. That incident was followed by an attack by Islamic State militants on a Shiite mosque in Kuwait that killed 25 more people.

The White House condemned the three “heinous acts” of terrorism and urged vigilance abroad.

Separately, Greece rejected a creditors’ proposal offering a five-month extension of the current bailout program to avert a default of $1.8 billion Athens must pay to the International Monetary Fund on Tuesday, a move that exerts pressure on European officials to resolve the crisis quickly before markets reopen on Monday. The European Union warned Greece has 48 hours to accept their reform-for-bailout plan or risk a default, although one EU official said there was more than a 50% chance a deal will be reached.

Still, German Chancellor Angela Merkel downplayed any chance of an agreement, saying Greek Prime Minister Alexis Tsipras has gone back on his negotiating position after Athens rejected a “generous offer” from creditors, comprising the European Union, IMF and the European Central Bank. She said there was no Plan B to rescue Greece, prompting an accusation of blackmail from Tsipras.

There’s fear of a potential run-on banks in Greece on Monday if there’s no deal this weekend, as depositors are already withdrawing most of their cash from banks, fearing a possible banking collapse.

Domestically, the total number of rigs in the U.S. increased two to 859 during the week-ended today but remains at a 12-year low, Baker Hughes said in its weekly report, with rigs in operation down 1,014 from a year ago.

Short-term oil supply and demand were mostly bearish for the week-ended June 19, as the Energy Information Administration detailed a 680,000 bbl stock build for gasoline while demand for the fuel spiked 479,000 bpd. Distillate fuel supplies increased 1.84 million bbl as demand for the fuel plummeted 509,000 bpd, EIA added.

EIA also reported a 4.9 million bbl crude stock draw, but roughly 400,000 bbl of the draw was crude moved from commercial inventory into the Strategic Petroleum Reserve, which is operated by the U.S. Department of Energy.

George Orwel can be reached at george.orwel@telventdtn.com