Oil Futures Edge Higher

NEW YORK (DTN) -- New York Mercantile Exchange oil futures advanced Thursday morning after the International Energy Agency said oil production by the Organization of Petroleum Exporting Countries fell in March while the agency maintained its demand outlook for the year.

The IEA outlook comes amid some uncertainty about the possible outcome of a meeting set for this Sunday (4/17) in Doha by the 13-member OPEC and non-OPEC oil producers, with the doubts curbing the upside for oil futures.

At 9:00 AM ET, NYMEX May West Texas Intermediate crude futures were up 9cts at $41.85 bbl. June Brent crude oil futures on the IntercontinentalExchange were up 15cts at $44.33 bbl. In products trade, NYMEX May ULSD futures edged up 0.33cts at $1.2689 gallon, while May RBOB futures were up 0.53cts at $1.5348 gallon, off a $1.5425 fresh 7-1/2 month spot high.

On Wall Street, equities rose in futures trading this morning while the U.S. dollar was little changed after new U.S. economic data showed the consumer price index rose 0.1% in March versus an expected 0.2% increase and weekly jobless claims unexpectedly fell 13,000 to a seasonally adjusted 253,000 in the week-ended April 9.

These data points follow Wednesday's Beige Book report showing the U.S. economy continued to expand from late February to early April, and that a low jobless rate is spurring an uptick in wage growth.

Supply remains the key issue for oil traders. In its Oil Market Report for April, IEA said OPEC production fell by 90,000 bpd in March to 32.47 million bpd as ongoing outages in Nigeria, the United Arab Emirates and Iraq more than offset a further increase from Iran and higher flows from Angola. Supply from Saudi Arabia dipped in March but held near 10.2 million bpd.

IEA said growth in global oil demand will ease to around 1.2 million bpd in 2016, below the 1.8 million bpd expansion of last year. "Preliminary data for the first quarter of 2016 reveal year-on-year growth down to 1.2 million bpd, after gains of 1.4 million bpd in the final quarter of 2015 and 2.3 million bpd in the prior quarter," said the report.

OPEC and non-OPEC producers will discuss a plan designed by Saudi Arabia and Russia in February to freeze production at January levels, a move meant to be the first step in rebalancing the oversupplied oil market and to stabilize oil prices.

Speculation about the output freeze led NYMEX WTI to rebound from a 12-1/2 year low of $26.05 bbl posted Feb. 11 to a $42.42 bbl 4-1/2 month high on Wednesday (4/13).

However, recent comments by Saudi Arabia and Iran have raised doubts about an agreement being reached because Tehran has rejected a Saudi demand that every OPEC member, including Iran, freeze their output. Iran argues they won sanctions relief in January and must be allowed to return their production to their pre-sanction's level before considering the freeze plan. Russia and Kuwait have said there could still be deal without Iran.

Still, critics note that production by Russia, Iraq and Saudi Arabia were at or near record highs in January and noted a freeze is not a cut in output. Other analysts point out that any deal, whether insufficient or not, is a major step forward that may cement the bullish psychology currently driving oil trading.

The Energy Information Administration said Wednesday crude stocks rose by 6.6 million bbl but U.S. crude production fell 31,000 bpd to 8.977 million bpd during the week-ended April 8. Gasoline demand was up 409,000 bpd for the week that pushed down stocks down 4.2 million bbl, while distillate stocks rose 505,000 bbl, with demand up 244,000 bpd.