WTI, Brent Settle at Multi-Month Highs

CRANBURY, N.J. (DTN) -- West Texas Intermediate on the New York Mercantile Exchange and Brent crude on the IntercontinentalExchange settled at their highest point in months, and for Brent above $50 per barrel (bbl) for the second out of the past three sessions, while NYMEX RBOB contrasted with crude, ending at a three-week low. NYMEX ULSD futures ended up, consolidating within Friday's trade range.

An afternoon downturn to a fresh three-week low by the U.S. dollar on the heels of comments from Federal Reserve Chair Janet Yellen added to WTI's price upside. In an early afternoon speech in Philadelphia, Yellen reiterated the central bank would gradually increase the important overnight interest rate between banks, which follows Friday's dismal and unexpected employment report for May that many in the market believe have nixed a move higher in the federal funds rate at the Fed's June 14-15 meeting.

NYMEX July WTI futures registered a $49.90 bbl intraday high, and gained $1.07, or 2.2%, on the session with a $49.69 settlement, the highest settlement on the spot continuation chart since July 21, 2015.

ICE August Brent crude futures settled up 91 cents or 1.9% at $50.55 bbl, a seven-month high settlement on the spot continuous chart, edging off a $50.83 intraday high.

The gasoline contract took a different path, with NYMEX July RBOB futures settling down 1.88 cents at $1.5887 gallon, the lowest end-day price on the spot continuous chart since May 13. NYMEX July ULSD futures settled up 1.5 cents at $1.5031 gallon amid inside trade.

The crude grades advanced on indications of a tightening market, although analysts note crude production from the Organization of the Petroleum Exporting Countries continues to increase, while recent production outages in Canada due to wildfires and in Nigeria due to militant attacks to the OPEC member's oil infrastructure are likely short-lived. Indeed, workers in Canada's oil sands projects in Alberta are gradually returning to their homes after the province's largest fire in history shut-in roughly 1.2 million barrels per day (bpd) of heavy oil output.

Nigeria's output could be a moving target, with the militant group Niger Delta Avengers targeting oil wells and pipelines in its bid to extort autonomy from the North African country. An attack on crude oil pipelines late last week that forced a production shut-in was the latest event cutting output.

The most recent data from the Energy Information Administration does show sharply lower production from the United States, which has consistently declined over the past three months to a 20-month low at 8.735 million bpd. U.S. crude output is down roughly 1.0 million bpd from an April 2015 peak.

Higher oil prices could, however, reverse the downtrend. Baker Hughes, Inc. on Friday reported rigs drilling for oil increased by nine last week.

Gasoline futures remain under pressure, as noncommercial market participants continue to exit long positions amid a large inventory overhang, and despite strong demand. The most recent Commitment of Trader's report from the Commodity Futures Trading Commission shows speculators cut their bets for higher moving RBOB futures to a six-month low as of May 31.

Brian L. Milne can be reached at brian.milne@dtn.com

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