Oil Futures Closer Lower

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Monday afternoon on a weaker dollar and an upward revision in demand expectations by the Organization of Petroleum Exporting Countries following a steep decline by the futures complex in Friday's trade.

The dollar fell after Federal Reserve Governor Lael Brainard warned against a rush to raise interest rate even as the economy makes gradual progress toward achieving the central bank's twin goals of full employment and 2% annual inflation. The caution comes ahead of next week's meeting of the Federal Open Market Committee.

"Brainard's comment prompted a stock market rebound that helped oil higher," said analyst Phil Flynn at Price Futures. "RBOB rallied because there was a report about a Colonial product pipeline leak over the weekend."

Colonial Pipeline said it expects to restore service on its main Line 01 that delivers gasoline later this week as crews work to repair a leak in Alabama.

In its Monthly Oil Market Report, OPEC called for annual global oil demand growth of 1.23 million bpd in 2016 to 94.27 million bpd, revised up a slight 10,000 bpd from the outlook in August. For 2017, OPEC held its projected year-on-year consumption growth rate unchanged at 1.15 million bpd for demand at 95.42 million bpd.

Oil futures were also supported by a report by industry monitoring firm Genscape reporting a crude stock decline of 330,611 bbl at Cushing, Okla., the delivery point for NYMEX West Texas Intermediate futures during the week-ended today.

NYMEX October WTI crude futures settled 41cts higher at $46.29 bbl, reversing off a three-day low at $44.72. November Brent crude oil futures contract on the IntercontinentalExchange settled 31cts higher at $48.32 bbl, reversing off a $46.90 four-day low.

NYMEX October ULSD futures moved 1.11cts higher to $1.4415 gallon at settlement, reversing off a three-day low at $1.4039. NYMEX October RBOB futures settled 2.88cts higher at $1.3899 gallon, reversing off a three-day low of $1.3507.

On the bearish side, OPEC estimated non-OPEC oil supply would contract 610,000 bpd to 56.32 million bpd in 2016, which reflects an 180,000 bpd upward adjustment versus estimates published a month ago. For 2017, the non-OPEC supply estimate was revised up 350,000 bpd for a year-on-year growth rate of 200,000 bpd at 56.52 million bpd.

Citing secondary sources, the report said OPEC crude production decreased by 23,000 bpd in August to 33.24 million bpd, with higher oil supplies from Iraq and Saudi Arabia offsetting declines in Libya and Nigeria supplies. The report also said Saudi Arabia communicated to OPEC that it produced 10.63 million bpd in August, although secondary sources showed the Kingdom produced 10.605 million bpd during the same month.

Looking ahead, the market expects a build in U.S. crude oil inventories to be reported this week after industry and government data last week showed a weather-induced steep stock draw for domestic crude oil inventories. Demand is also expected to ease in line with seasonal patterns after the summer.

George Orwel can be reached at george.orwel@dtn.com