NYMEX Oil Futures Settle Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Friday afternoon after a volatile trade week, with West Texas Intermediate crude and Brent futures on the IntercontinentalExchange snapping a three-day rally to post moderate losses on the session while NYMEX RBOB and ULSD contracts eked out fractional gains. The complex posted weekly gains across the board.

The WTI and Brent crude contracts eased on profit-taking as the U.S. dollar strengthened and on a new report that showed rising production by the Organization of Petroleum Exporting Countries. Also weighing on crude values was news the recently disrupted Canadian oil sands production due to wildfires were being brought back on line.

Moreover, Russian oil minister Alexander Novak said Russia won't attend OPEC's meeting next month in Vienna and doesn't think the 13-member producer group will freeze output when they meet June 2 after refusing in April to finalize a tentative deal in Doha, Qatar that would have keep output at January production levels.

Those concerns were partially offset after Baker Hughes, Inc.'s weekly U.S. rig count report showed the 12th straight decline in the number of rigs drilling for oil. The report for the week-ended today showed oil rigs fell by 10 to 318, a sign of continued decline in domestic production.

At settlement, NYMEX June WTI crude futures fell 49cts to $46.21 bbl, having reversed from Thursday's 6-1/2 month spot high of $47.02. The contract gained $1.55 or 3.5% for the week. ICE July Brent settled 25cts lower at $47.83 bbl after inside trade while up $2.46 or 5.4% for the week.

In products trade, NYMEX June ULSD futures gained 0.91cts to $1.4031 gallon at settlement, off a $1.4099 two-week spot high, and gained 6.58cts or 4.9% for the week. NYMEX June RBOB futures nudged up 0.49cts to $1.5882 gallon at settlement, off a $1.5938 near two-week spot high, and gained 9.2cts or 6.1% for the week.

On Wall Street, major U.S. equity indices posted losses with blue-chip Dow Jones Industrial Average down nearly 200 points while the dollar rose 0.5% to a near three-week high versus peer currencies, with a stronger dollar bearish for the oil complex.

The dollar gained after strong economic data validated views of U.S. Federal Reserve officials who this week said the economy remains resilient and that recent talk of an impending recession had no basis. Heads of three regional Federal Reserve banks have called for higher interest rates in the past week, arguing that the central bank risks stoking an asset bubble by delaying raising rates.

U.S. Treasury Secretary Jack Lew also this morning said fundamentals of the U.S. economy are relatively strong despite headwinds from overseas. The Federal Open Market Committee meets next June 14-15 to discuss the economy and interest rates.

Fresh data released today showed April retail prices up 1.3% in April, the biggest gain since March 2015, after falling 0.3% in March. Also, the University of Michigan's consumer sentiment index rose to the highest level in a year. These data points eased concern over the U.S. economy after growth slowed in the first quarter.

Oil traders were focused on oil supply and demand fundamentals, with worries over rising output by OPEC triggering selling pressure. In its Monthly Oil Market Report released this morning, OPEC kept its global outlook for demand growth at 1.2 million bpd in 2016 and tweaked non-OPEC production to decline by 740,000 bpd this year.

The MOMR for May, citing secondary sources, showed production by the cartel increased 188,200 bpd from March to April with output at a 32.44 million bpd multiyear high. Five OPEC countries raised their production in April with Iran output expanding the most, up 198,200 bpd to 3.451 million bpd and to the highest production rate since January 2012.

WTI and Brent futures were supported however by an improved demand outlook and continuing outage of about 700,000 bpd of Nigerian output due to attacks on production platforms and pipelines. Shell, ExxonMobil and Chevron have all declared force majeure on their exports from Qua Iboe, Forcados and Bonny Light oilfields. In Canada, the 1.0 million bpd of oil sands output disrupted last week by wildfires are slowing returning on line.

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