Oil Futures Close Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed with a downside bias Monday after a choppy post-Easter session, with ULSD and West Texas Intermediate futures drifting down on renewed talk of excess supply and a lack of confidence that major oil producers -- including Russia and Saudi Arabia -- would agree to implement a production freeze.

NYMEX RBOB futures remained higher at the close, boosted by strong demand for the fuel and expectation for another weekly stock draw for domestic gasoline. The downside for WTI and ULSD was also limited by a downside reversal for the dollar after the release of weaker-than-expected economic data and ahead of Federal Reserve Chair Janet Yellen's speech at the New York Economic Club on Tuesday, said analysts.

"Drifting is the word I would use for this market today because we have the same backdrop of oversupply and a lack of confidence OPEC will keep a lid on supply," said Tom Bentz, head of energy derivatives at ABN AMRO. "Overall, the market is uncertain, that's why WTI crude is bouncing around within a range of $42 and $33 bbl."

Trade volume was thin because European traders were still away for the Easter Monday holiday today.

NYMEX May WTI crude oil futures settled down 7cts at $39.39 bbl, reversing off a two-day high at $40.14 while the May Brent futures contract traded on the IntercontinentalExchange was down 17cts at $40.27 bbl, reversing off a two-day high of $41.00 bbl. In spread trade, the Brent premium over WTI narrowed 10cts to 88cts bbl at the close.

Short-term technical indicators show both Brent and WTI in an upside trend despite today's lower settlement.

NYMEX April ULSD futures eased 1.78cts to $1.1801 gallon while the April RBOB futures contract settled up 0.21cts to $1.4680 gallon, off a $1.4858 gallon two-day high.

RBOB remains the strongest segment of the oil futures complex "because of strong demand and we expect another draw for gasoline stocks," Bentz said.

"Book squaring in options on April heating oil and RBOB gasoline futures may be a feature of today's trade," said Tim Evans, energy specialist at Citi Futures. "The underlying April heating oil and RBOB futures will expire on Thursday (3/31), along with the May Brent crude oil futures."

An early survey by Schneider Electric shows the market expects another domestic crude stock increase occurred during the week-ended March 25, with a 1.7 million bbl build anticipated. Gasoline supplies are expected to have been drawn down by 2.5 million bbl and distillate supplies are seen down 500,000 bbl.

The American Petroleum Institute will release its weekly data at 4:30 p.m. EDT while the Energy Information Administration will issue its data at 10:30 a.m. EDT Wednesday.

Last week, EIA reported crude stocks soared 9.4 million bbl while gasoline stocks plunged 4.6 million bbl and distillates rose by about 917,000 bbl in the week-ended March 18.

The oil complex was higher overnight, supported by data showing an increase in China's crude imports, reductions in Nigerian and Iraqi supply and the prospect that the Organization of Petroleum Exporting Countries would freeze their oil production at January levels when they meet with non-OPEC producers including Russia on April 17 in Qatar.

Most OPEC countries have agreed to participate in the production freeze, although Libya and Iran won't attend the meeting and Iran has said it won't freeze its output until it reaches 4.0 million bpd. Citing secondary sources, OPEC in its latest Monthly Oil Market Report showed Iranian crude production in January at 2.944 million bpd and at 3.132 million bpd in February.

Critics of the potential freeze deal note, however, production by the Saudis, Iraq and Russia were at or near record high output rates in January and the International Energy Agency last week said such an agreement would likely be meaningless.

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