Oil Little Changed Friday

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 were little changed Friday morning as the regular session got underway, consolidating within Thursday's trade range following conflicting economic data from the United States and China, the world's two largest economies.

Shallowly mixed trading for oil futures follows a volatile week of trade, with the nearest delivered contracts swinging to 3-1/2 week lows for crude and RBOB futures and a five-week low for ULSD futures midweek before rallying off key support points. Nearest delivered oil futures are down on the week early Friday.

The market's choppiness Friday morning follows bearish trade data from China, reporting overnight that exports dropped 7.7% in 2016, the second annual decline, with the trade flow the weakest since 2009. China's imports were down 5.5% in 2016.

The weak trade flow for the dynamo economy raises concern for growth in oil demand this year, and comes ahead of a Trump administration that has talked of protectionist trade policies that could spark a trade war.

However, the U.S. economy continues to demonstrate strength, with retail sales in December up a seasonally adjusted 0.6%, according to the Commerce Department, following a 0.2% boost in November. The gain was driven by vehicle sales, up 2.4%, and gasoline sales, up 2.0%.

The data comes ahead of the release of the preliminary reading for the Michigan consumer confidence index in January, which is expected at 98.8 following December's final reading of 98.2--a 15-year high.

The data follow projections out this week for greater economic growth this year compared with 2016 from the Organization for Economic Cooperation and Development on Wednesday and by the World Bank on Tuesday, with the latter forecasting a global economic expansion rate of 2.7% this year after a 2.3% growth rate in 2016. Both outlooks see the U.S. economy driving the expansion amid a change of policy with the incoming Trump administration.

On Tuesday, the Energy Information Administration in its Short-term Energy Outlook forecast global oil demand to climb 1.63 million bpd this year to 97.2 million bpd, with the consumption rate expected to increase by another 1.51 million bpd in 2018. That follows an estimated year-on-year growth rate for 2016 of 1.43 million bpd.

At 9:00 AM ET, NYMEX February West Texas Intermediate futures were down 29cts at $52.72 bbl, with March Brent on the IntercontinentalExchange 22cts lower at $55.79 bbl. NYMEX February ULSD futures were down 0.81cts at $1.6675 gallon, with February RBOB futures up 11 points at $1.6119 gallon.

Market sentiment remains bullish, illustrated with Wednesday's sudden upside reversal as key support points were targeted after a steep decline Monday and Tuesday amid an overbought market and concern a market rebalance would take longer than some had forecast despite 1.758 million bpd in production cuts.

On Thursday, the oil ministers for Saudi Arabia, Iraq and Kuwait said they had made production cuts in response to the Nov. 30 agreement by the Organization of the Petroleum Exporting Countries, with Kuwait reducing exports more than its 131,000 bpd pledge and Iraq cutting the majority of its pledge. Saudi Arabia said it cut more than its 486,000 bpd pledge, and will reduce output even more in February.

OPEC agreed to a 1.2 million bpd reduction in crude output during the first six months of 2017, with 11 non-OPEC oil producing countries on Dec. 10 reaching consensus for a 558,000 bpd cut. Russia accounts for 300,000 bpd of the non-OPEC oil production cut.

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

(BAS)

Brian Milne