Oil Futures Settle Down Monday
NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled sharply lower this afternoon amid profit-taking as the U.S. dollar strengthened on expectations the Federal Reserve will signal this week it would raise federal funds rate and on doubts next month's meeting of leading oil producers will lead to any agreement to reign in supply.
"It seems unlikely that members of OPEC could come to an agreement," said David Thompson, executive vice president of Powerhouse, a Washington, D.C.-based brokerage firm. "And some in the trading community are now seeing an increasing correlation between the trade-weighted U.S dollar and West Texas Intermediate crude."
"There's no compelling reason [for traders] to be long because the OPEC meeting is weeks away and the possibility of a ceasefire between the Nigerian government and militants was enough for the market to end the longest run of daily gains for WTI in four years."
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NYMEX September WTI crude futures expired $1.47 or 3% lower at $47.05 per barrel (bbl) and reversed lower after having rallied last week to a $48.75 six-week spot high. The October WTI contract was down $1.70 or 3.5% at $47.41 bbl at settlement. The October Brent crude contract on the IntercontinentalExchange settled down $1.72 or 3.4% at $49.16 bbl.
NYMEX September ULSD futures dropped 3.32 cents or 2.1% to a $1.4864 gallon settlement, and September RBOB futures fell 2.82 cents or 1.9% to a $1.4842 gallon settlement.
NYMEX WTI and ICE Brent have both rallied into technical bull market territory from Aug. 3 lows amid speculation the Organization of Petroleum Exporting Countries and non-OPEC producers such as Russia would agree to stabilize oil prices.
Also, reports showed high oil production by both Russia and Saudi Arabia, and rising exports by Iraq and Nigeria. The Iraqi government has cut a deal with Kurdish leaders, a move that allowed exports from northern Kurdistan region to increase by 150,000 barrels per day (bpd). A militant group that has sabotaged Nigerian oil production reportedly said it was ready for a ceasefire and dialogue with the government.
In addition, U.S. production increased by 152,000 bpd to 8.597 million bpd in the week-ended Aug. 12, the highest since late June, according to the Energy Information Administration. Baker Hughes Inc. reported another increase in oil rigs by 10 to 491 during the week-ended Aug. 19, the eighth straight weekly increase.
The market is now looking forward to weekly oil supply data from the American Petroleum Institute on Tuesday and from the EIA on Wednesday. An early survey of analysts showed expectations for U.S. crude and gasoline stock draws and a stock build for distillates for the week-ended Aug. 19.
Also, data released today by Genscape showed a drawdown of more than 187,000 bbl last week at the Cushing, Oklahoma, delivery point for NYMEX WTI futures.
George Orwel can be reached at george.orwel@dtn.com
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