Oil Mixed in Monday Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures were mixed with a downside bias Monday morning as a report showing higher oil supply by the 13-member Organization of Petroleum Exporting Countries weighed against a weaker U.S. dollar.

"The back end of the oil curve will continue to face more producer selling than consumer-linked buying, in our view, as prices rise," said Barclays Capital in a note to clients. "As a result, the oil forward curve is likely to remain flat for the rest of the year, with volatile swings in the front of the curve from mild contango to backwardation."

The oil futures complex has been volatile in recent days which is expected to continue this week, with traders focused not only supply but also expectations for an improvement in demand and on the economy.

At 9:00 AM ET, NYMEX June West Texas Intermediate crude oil futures were up 8cts at $46.00 bbl while the July Brent crude oil futures contract on the IntercontinentalExchange eased 18cts to $47.19 bbl. NYMEX June ULSD futures rose 0.4cts to $1.3900 gallon while NYMEX June RBOB futures eased 0.89cts to $1.5955 gallon.

On Wall Street, U.S. equity index futures were higher this morning while the dollar fell to a fresh eight-month low versus a basket of six rival currencies.

A new report by Reuters saying OPEC production rose by 0.5% in April from March renewed concern over the massive global oil glut. The report said OPEC production was up 170,000 bpd to 32.64 million bpd, which is close to January's record level.

OPEC output could have been higher if there were no supply disruptions in Kuwait, Nigeria, and Venezuela last month. Kuwait's production was partially shut due to a three-day strike by oil workers, Nigerian output was disrupted by a pipeline outage and Venezuelan supply is still being disrupted by power outages.

International Energy Agency Executive Director Fatih Birol said on Sunday (5/1) that oil prices may have bottomed if no major global economic problem emerges. He said during a G-7 meeting of oil ministers in Japan that oil prices are likely to move higher rather than lower.

The oil complex settled lower Friday (4/29) amid profit-taking, end-of-month position squaring and technical pressure. Bullish market sentiment was bolstered by a Bakers Hughes Inc. report showing the total number of active oil rigs in the United States fell by 11 last week to the lowest level since record keeping began in 1968. The rig count is a barometer for oil production.

EIA last week said U.S. crude oil production fell 15,000 bpd to 8.938 million bpd in the week-ended April 22, the seventh straight weekly decline in domestic output. U.S. Energy Secretary Ernest Monitz at the G-7 meeting on Sunday said U.S. oil output would fall by 600,000 bpd this year versus 2015, when domestic production averaged 9.4 million bpd.

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