Oil Retreats in Early Wednesday Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures retreated at the start of regular trade Wednesday morning after a four-day rally, pressured by industry data showing higher supply in the United States and globally. This comes in front of the Energy Information Administration's oil report for the week-ended Dec. 9 that is expected to show a stock build for crude and a draw for middle distillate fuel supply.

The API report issued late Tuesday showed domestic crude stockpiles increased by an unexpected 4.7 million bbl during the week-ended Dec. 9, with gasoline supplies also rising by a bigger-than-expected 3.9 million bbl and distillate fuel inventories posting a surprise 233,000 bbl week-over-week build.

This morning, the Organization of Petroleum Exporting Country's Monthly Oil Market Report said global crude oil supply increased 530,000 bpd month-over-month to 96.84 million bpd in November. The report pointed to a larger global oil surplus in 2017 unless the Nov. 30 OPEC agreement to cut output by 1.2 million bpd to 32.5 million bpd is fully complied with.

MOMR for December revised up its forecast for non-OPEC oil supply in 2017 by 70,000 bpd for year-on-year growth of 300,000 bpd to a total output rate for the group of 56.5 million bpd. That follows a 780,000 bpd annual decline in non-OPEC supply this year to 56.2 million bpd.

On Tuesday, the International Energy Agency said OPEC production totaled 34.2 million bpd in November, 400,000 bpd more than what the cartel pumped in October that contributed to the 98.2 million bpd total global oil production in November.

Oil futures have trended higher since OPEC's supply deal reached on Nov. 30 and the subsequent Dec. 10 agreement by 11 non-OPEC producers to cut their output by a combined 558,000 bpd starting Jan. 1, 2017. The non-OPEC production cut pushed spot-month crude and ULSD futures to 17-month highs on Monday (12/12) before the latest downturn for oil prices overnight.

At 9:00 AM ET, NYMEX January WTI futures were down 74cts to $52.24 bbl while ICE February Brent crude futures fell 61cts to $55.11 bbl. ULSD futures eased 0.80cts to $1.6667 gallon and January RBOB futures posted a 2.19cts loss to $1.5288 gallon.

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