Oil Futures End Down

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange registered their third down day Monday, with West Texas Intermediate swinging to a three-month low and oil products two-month lows or better, as relief for an oversupplied market is seen pushed farther into the horizon while the U.S. dollar spiked.

Continuing its rally since the Nov. 8 upset victory for Donald Trump as the next U.S. president, and lent support on expectations the Federal Reserve would hike the federal funds rate when they meet in mid-December the U.S. dollar surged to a nearly one-year high in index trading. Trump, seen as a pro-business president-elect, is expected to reduce regulation and push spending for infrastructure that is seen driving inflation higher, supporting the currency.

In addition to the stronger dollar, which has an inverse relationship with domestic oil prices since oil trades globally in dollar denominations, Trump supports the development of oil and gas that could add to drilling activity following eight years of increasing regulation for the industry under the Obama administration.

NYMEX December WTI futures settled a modest 9 cents lower at $43.32 per barrel (bbl) after bouncing off retracement support for the June-August downtrend at $42.14 with a three-month low on the spot continuation chart of $42.20 bbl. While paring the decline, the WTI contract is on course to test the $39.19 bbl August low in full retracement of an OPEC cut inspired advance now seen unraveling.

January Brent crude on the IntercontinentalExchange settled down 32 cents at $44.43 bbl, paring a decline to a $43.57 fresh three-month low on the spot continuation chart.

NYMEX December ULSD futures settled down 1.57 cents at $1.3855 gallon, edging off a fresh three-month spot low of $1.3737 gallon. The spot-month contract has retracement support near $1.3250 and $1.2500.

NYMEX December RBOB futures ended 2.75 cents lower at $1.2778 gallon, registering the ninth consecutive session with a lower settlement. The contract spiked in ending October on the shutdown of Colonial Pipeline's main gasoline due to an explosion, but the pipeline was repaired and returned to service less than a week later, muzzling the price response in the adequately supplied market. The RBOB contract traded at a better than two-month low on the spot continuation chart of $1.2681 gallon before trimming the loss, and could test retracement support just above $1.19 gallon.

Market expectations for the Organization of the Petroleum Exporting Countries to rein in a globally oversupplied market by agreeing to a cut in production when they meet Nov. 30 and implementing such an agreement have diminished sharply following reports released late last week showing a large increase in world oil supply in October.

The International Energy Agency said in their Oil Market Report released Nov. 10 that global oil supply in October increased 800,000 barrels per day (bpd) to 97.8 million bpd "after producers in OPEC and non-OPEC opened the taps," with 230,000 bpd of that increase generated by OPEC. IEA said OPEC production has increased for five consecutive months through October to a 33.83 million bpd record high.

A day later on Friday, Nov. 11, OPEC corroborated IEA's findings, citing secondary sources in their Monthly Oil Market Report that showed a 240,000 bpd increase in OPEC crude production in October to 33.64 million bpd.

A number of analysts cite the difficulty for OPEC when they meet Nov. 30 to agree to cut production to align with a 32.5 million to 33.0 million bpd output pledge made by members Sept. 28 in Algiers.

Meanwhile, production from Russia, the world's largest producer, is at or near a record high while in the United States output reached a nearly five-month high of 8.692 million bpd in early November.

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


Brian Milne