Oil Futures Mixed on Supply, Dollar

Oil Futures Mixed on Supply, Dollar

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ranged shallowly mixed Monday morning as traders mulled the lingering global supply overhang against the relatively weak dollar.

The dollar is trading near a 5-1/2 month low posted March 31 as Friday's jobs report for March showing 215,000 jobs were added failed to change the view that the U.S. Federal Reserve would delay raising interest rates. A weaker dollar is supportive of oil futures.

However, Saudi Arabian Deputy Crown Prince Mohammed bin Salman said in a news interview with Bloomberg that they won't freeze their oil production unless Iran does the same, reversing its previous position, and raising doubts a final agreement would be struck by the Organization of Petroleum Exporting Countries and non-OPEC producers to keep output at January levels. Iran has made it clear it won't freeze its output until its production returns to pre-sanctions level.

International oil producers recently scheduled an April 17 summit to discuss the plan to freeze output. It's unclear what impact this latest Saudi statement would have on the plan or whether the meeting would be rescheduled, given the biannual OPEC meeting will be held in June.

In any case, analysts have been poking many holes in the output freeze plan, noting a freeze is not a cut, and that Russia, Saudi Arabia and Iraq already produced at or near record highs during January.

"I find it hard that these two countries, Saudis and Iran, will come together to do business," said Michael Singer, chief executive of Ramius.

In a report titled "Anti-OPEC freeze," Barclays Capital said, "While the oil market surplus is set to shrink over the coming quarters, the pace with which it will shrink depends on a number of factors."

At 9:00 AM ET, NYMEX May West Texas Intermediate crude oil futures were down 10cts at $38.69 bbl, off a two-week spot low at $36.18, while the June Brent futures contract traded on the IntercontinentalExchange was down 19cts at $38.48 bbl, off a one-month spot low of $38.12 bbl.

In products trade, NYMEX May ULSD futures eased 0.67cts to $1.1250 gallon, off a one-month spot low of $1.1209, while May RBOB futures edged up 0.28cts to $1.4044 gallon, reversing up off a $1.3904 gallon two-week spot low.

Today, Oil Minister Bijan Zanganeh said Iran will continue raising production and exports until it gets to the level before the imposition of sanctions in 2011, according to a Reuters report.

Late last week, Bloomberg News reported Iran's production in March at 3.2 million bpd, up 100,000 bpd from February, with Tehran targeting 4.0 million bpd.

Hedge funds cut their bullish holdings of crude oil futures during the week-ended March 29, the first cut in six weeks, according the latest Commitment of Traders report from the Commodity Futures Trading Commission released Friday (4/1).

The short-term trend remains down for WTI, Brent and RBOB futures while the downtrend for ULSD may be nearing its end, according to DTN senior analyst Darin Newsom.