CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the IntercontinentalExchange settled Thursday's session with gains, with the crude grades edging higher despite a decision by the Organization of the Petroleum Exporting Countries to continue their market strategy approach to production. Brent crude settled above $50 bbl for the first time since early November 2015.
NYMEX oil products were bolstered by supportive supply data reported late morning by the Energy Information Administration, although distillate demand slumped to a two-month low despite a pop higher in exports.
It was another choppy session Thursday, with the two key features OPEC's biannual meeting and the EIA statistics, which were delayed a day by Monday's observance of Memorial Day. Action by the European Central Bank and U.S. jobs data were also features affecting early trading, with traders to focus on the Labor Department's nonfarm payroll report and Baker Hughes, Inc.'s weekly report on active rigs in the United States.
OPEC in a statement following their 169th meeting today pointed to signs of a market rebalancing, deeming no need to coordinate a production cut to boost prices, while promising unity by cartel members to ensure a fair market price for both consumers and producers.
OPEC forecasts non-OPEC supply to contract 740,000 bpd this year, adding that crude oil is now down 1.0 million bpd from the start of 2015 when it peaked. The cartel also pointed to expectations for strong global demand, projecting year-on-year growth of 1.2 million bpd after an annual growth rate of 1.5 million bpd in 2015.
"The Conference observed that, since its last meeting in December 2015, crude oil prices have risen by more than 80%, supply and demand is converging and oil and product stock levels in the [Organization for Economic Cooperation and Development] have recently shown relative moderation," read the communique.
"This is testament to the fact that the market is moving through the balancing process."
At settlement, July NYMEX West Texas Intermediate was up a modest 16cts at $49.17 bbl, edging higher despite a stronger U.S. dollar that reversed losses earlier in the day. A 1.4 million bbl draw in commercial crude inventories which pressed stocks to a two-month low joined by the 12th consecutive decline in domestic crude production that pressed output to the lowest point since September 2014 at 8.735 million bpd also underpinned WTI.
ICE August Brent crude settled up 32cts at $50.04 bbl, although its $50.30 intraday high was below last week's $50.51 trade.
NYMEX July ULSD futures settled up 0.99cts at $1.5088 gallon, and traded at a $1.5298 seven-month high on the spot continuation chart, with July RBOB futures ending up 1.93cts at $1.6346 gallon.
EIA also reported a 1.5 million bbl decline in gasoline inventory for the week leading to Memorial Day, and that implied demand jumped 200,000 bpd to 9.716 million bpd and to the second highest demand rate of 2016 that pushed the gasoline contract out of its recent slump.
The ULSD contract advanced alongside Brent, further bolstered after the EIA reported a larger-than-expected 1.3 million bbl draw from distillate supply. Distillate inventory has now declined for seven consecutive weeks, drawn down 13.9 million bbl or 8.5% over the period to a 149.6 million bbl six-month low. Yet, implied distillate demand declined for the second straight week, down 261,000 bpd to 3.827 million bpd, and despite a 229,000 bpd increase in exports.
Brian L. Milne can be reached at email@example.com
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