CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange and Brent crude on the IntercontinentalExchange continued Thursday's decline early Friday on likely profit taking after posting multi-week highs midweek and into early Thursday for the crude grades, and ahead of the three-day Memorial Day weekend.
The weakening complex follows the first push above $50 bbl of 2016 for nearest delivered West Texas Intermediate and Brent on Thursday, with the contracts unable to hold above the psychological benchmark, ending the session fractionally lower.
The softening complex also comes ahead of Tuesday's (5/31) expiration of July Brent, June RBOB and June ULSD futures, with the oil products contracts also down on the week so far early Friday. The Brent contract is near flat with prior Friday.
Nearest delivered WTI futures were working on a roughly $1.00 bbl advance on the week, which follows the forward roll from June delivery which expired prior Friday to the July contract as the front month contract. As July rolled into the nearest to delivery position, WTI erased its discount to Brent.
The move to parity was lent support by steep drawdowns in U.S. commercial crude inventory in May, down 6.3 million bbl since late April, while domestic crude production has declined for 11 straight weeks through May 20, with output down 311,000 bpd over the period to a 22-month low.
At 9:00 AM ET, NYMEX July WTI futures were down 64cts or 1.3% at $48.84 bbl. ICE July Brent crude was down 75cts or 1.5% at $48.84 bbl, with the August contract 69cts or 1.4% lower at $49.48 bbl.
NYMEX June RBOB futures moved 1.16cts lower to $1.6079 gallon while the July contract was down 1.18cts at $1.6149 gallon. NYMEX June ULSD futures were 1.96cts or 1.3% lower at $1.4817 gallon, with July delivery down 1.89cts or 1.3% at $1.4873.
The RBOB contract continues to retreat from Tuesday's $1.6664 better-than nine-month spot high despite this weekend's kickoff to peak driving demand. The fading valuation comes after bearish weekly data released Wednesday by the Energy Information Administration that showed an unexpected inventory build and lower demand for the week ended May 20.
The decline by WTI also comes amid a stronger U.S. dollar after weakening Thursday to an eight-day low, with the greenback initially paring most of its advance following the second reading of U.S. gross domestic product for the first quarter released by the Bureau of Economic Analysis this morning.
BEA reported a 0.3% upside adjustment in the first quarter growth rate to a still tepid 0.8% annual rate, which was below market expectations for a reading at 0.9%.
The strengthening dollar also comes ahead of comments by Federal Reserve Chair Janet Yellen this afternoon, with Yellen set to speak at 1:15 PM ET in Massachusetts. Her talk follows a parade of speeches and comments from Fed officials over the past couple of weeks that have raised anticipation the central bank could raise the federal funds rate at their June meeting that would likely boost the dollar's strength. Earlier in the second quarter, expectation for a June rate hike was near zero.
Ahead of Yellen's comments, Baker Hughes, Inc. will release its U.S. rig count for the week ended today at 1:00 PM ET, with last week's report showing 318 rigs drilling for oil, unchanged from week prior, with the number of active oil rigs at their lowest point since October 2009.
Brian L. Milne can be reached at firstname.lastname@example.org
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