Oil Dips Lower in Early Friday Trade
NEW YORK (DTN) -- New York Mercantile Exchange oil futures snapped a six-day rally and dipped lower at the start of regular trade Friday morning amid profit taking ahead of the midday release of Baker Hughes Inc.'s report on the number of rigs drilling for oil for the week-ended today. The futures complex is expected to remain volatile as regular trade gets underway.
The retreat for oil futures from multi-week highs posted overnight also was underpinned by a strengthening dollar and doubt the Organization of Petroleum Exporting Countries and non-OPEC would in fact take action to stabilize oil prices next month.
Oil prices have rallied sharply since Aug. 8 after the announcement of informal talks in Algeria on Sept. 26-28 between the OPEC and non-OPEC producers including Russia. However, Nigerian Oil Minister Emmanuel Ibe Kachikwu said Thursday that a deal to cut production is unlikely but all options are on the table.
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That comment cast doubt on any plans by OPEC members to voluntarily take action such as freezing or cutting output to stabilize oil prices, and analysts have noted that Saudi Arabia is sending mixed signals about its production plans.
At 9:00 AM ET, NYMEX September West Texas Intermediate crude futures eased 10cts to $48.12 bbl, reversing off a $48.75 better than six-week spot high. Despite the dip, WTI remains in bull market territory and is on course to post a gain for the week.
The October Brent contract on the IntercontinentalExchange fell 25cts to $50.64 bbl, reversing off a nine-week spot high of $51.22.
NYMEX September ULSD futures fell 0.78cts to $1.5182 gallon, reversing off a $1.5324 eight-week spot high. The NYMEX September RBOB futures contract fell 0.78cts to $1.4819 gallon, reversing off a seven-week spot high of $1.4939.
In currency trade, the dollar reversed up from a seven-week low after San Francisco Federal Reserve Bank President John Williams and his New York counterpart William Dudley called for a hike in federal funds rate sooner rather than later because the domestic economy is strong enough to withstand a higher rate.
Still market focus remains on supply, with this afternoon's release of the change in active oil rigs this week by Baker Hughes providing guidance on U.S. crude production. Oil production by the United States rose last week by 152,000 bpd to 8.597 million bpd, the highest since last June, the Energy Information Administration said Wednesday (8/17).
A report published on Wednesday by Reuters said Saudi officials were quietly telling the market that output could rise in August to as high as 10.9 million bpd ahead of next month's OPEC meeting.
In addition, Russian production hit 11.03 million bpd in 2015, EIA data shows, and Moscow's real view regarding freezing output remains largely unknown, although oil minister Alexander Novak recently said Russia was open to holding talks with OPEC.
George Orwel can be reached at george.orwel@dtn.com
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