Oil Futures Plow Higher

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange rallied on the first day of trade for the holiday-truncated week, settling sharply higher on likely short covering as the market prices in an agreement by the Organization of the Petroleum Exporting Countries addressing crude production.

Weekend comments by Russian President Vladimir Putin that the world's largest oil producer would freeze production in coordination with an agreement by OPEC that restrains their output shored up market expectations for an OPEC agreement to be reached next week in Vienna.

Iran's Minister of Petroleum, HE Bijan Namdar Zanganeh, "pledged continued support for the implementation of the Algiers Accord and stated that he remains confident that an all-inclusive agreement can be reached during the upcoming OPEC Ministerial Meeting to be held in Vienna on 30 November 2016" during a meeting with OPEC Secretary General HE Mohammad Sanusi Barkindo, according to a news release today from the cartel.

In Algiers, OPEC agreed to a framework to hold crude production to a 32.5 million by 33.0 million barrel per day (bpd) range, with details to be worked out and agreed to on Nov. 30.

In their Oil Market Report released Nov. 10, the International Energy Agency reported OPEC crude production at a 33.83 million bpd record high.

NYMEX December West Texas Intermediate crude futures expired $1.80 higher at $47.49 per barrel (bbl) and near a $47.80 bbl three-week high on the spot continuation chart. January WTI futures settled up $1.88 at $48.24 bbl, near $48.21 retracement resistance on the spot continuous chart for the October to November downtrend.

January Brent crude futures on the IntercontinentalExchange settled up $2.04 at $48.90 bbl, near a $49.12 three-month spot high.

NYMEX December ULSD futures settled up 6.68 cents at $1.5245 gallon, cracking through the $1.5299 gallon 50% retracement point for the October-November decline with a $1.5353 gallon three-week high on the spot continuation chart.

NYMEX December RBOB futures settled 5.74 cents higher at $1.3965 gallon, paring an advance to a $1.4141 gallon two-week high. The spot-month contract moved through $1.4083 gallon retracement support for the November decline, with resistance next marked at the 50% $1.4516 gallon retracement point.

"People are starting to realize that the odds of an OPEC deal are pretty high and it comes at [a] time when the API is saying we have record demand, the major oil players are saying positive things, and open interest getting active in the futures market, so [it's] both an OPEC story and a demand story, said analyst Phil Flynn at Price Futures. [It's] a perfect combination for prices to move higher.

Late last week, the American Petroleum Institute said gasoline deliveries in the United States during the first 10 months of 2016 were 1.7% higher than year prior, and that total U.S. oil products deliveries were up 0.3% versus the comparable year ago period.

Monday's rally by oil futures came alongside a decline in the U.S. dollar in index trading from a 13-1/2 year high. U.S. oil prices have an inverse relationship with the greenback since oil trades internationally in dollar denominations.

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

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