NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended mixed this afternoon after seesawing earlier in the session, as bullish supply comments from Saudi Arabia prompted short covering that partly offset a stronger U.S. dollar.
The entire oil complex was higher on Saudi news before the NYMEX West Texas Intermediate contract lost momentum and reversed lower just before settlement on a lack of conviction, lingering supply glut and doubts about whether the Saudis are serious about supply cuts when in fact data shows the Kingdom pumping at a near record high.
"Part of this rally is technical after WTI contract failed to close below $40 per barrel (bbl) after several attempts, but the Saudi comments about the possibility to stabilize the market gave oil prices were most helpful," said analyst Phil Flynn at Price Futures Group.
The NYMEX January WTI contract settled down 15 cents at $41.75 bbl, while the ICE January Brent contract increased by 17 cents to $44.85 bbl.
The NYMEX December ULSD futures contract settled up 0.30 cents at $1.3743 gallon and the December RBOB futures contract advanced 2.31 cents to a $1.3134 gallon settlement.
The futures rally was triggered by a report the Saudi Arabian cabinet said in a statement that the kingdom was ready to work with other producers toward a stable oil price. The comment was understood to suggest Saudi Arabia might cut oil production in an effort to boost prices.
The comment came in the wake of calls by Venezuela that crude oil prices could tumble as low as $20 bbl if production was not reduced. Venezuela, whose budget has taken a heavy hit from low oil prices, is trying to build a consensus for a production cut ahead of the Dec. 4 summit of the Organization of Petroleum Exporting Countries in Vienna.
This is not the first time Venezuela has called for output cuts. Saudi Arabia has opposed every call for output cut over the past two years, with the unexpressed purpose of squeezing oil shale producers financially into reducing drilling activity.
It's not clear if the Saudis now believe it's time to act and there are many doubters. OPEC has been producing more than its agreed 30 million barrels per day (bpd) for nearly three years.
On the domestic front, an early survey by Schneider Electric shows crude oil stockpiles are expected to have increased by an average of 1.3 million in the week-ended Nov. 20, which would be the nine straight weekly build. The survey also anticipates crude stockpiles at the Cushing hub in Oklahoma rose 1.5 million bpd.
On products, the survey sees a 500,000 bbl stock draw for gasoline and a 1.8 million bbl stock draw for distillates during the week profiled.
On Wall Street, equities were lower while the U.S. dollar rallied to the highest level since April. The dollar's rally was linked to the prospects of a U.S. interest rate hike next month, with Federal Reserve officials openly in favor of a boost in rates on a stronger economy.
The oil market is expected to remain choppy ahead of Thanksgiving Day holiday on Thursday. AAA said this holiday could see the heaviest holiday travel in eight years, which means improved demand and that boosted RBOB futures.
George Orwel can be reached at firstname.lastname@example.org
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