Oil Higher in Tuesday Trade
NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved higher at the start of regular trade Tuesday morning on technical support and after Monday's lower settlement for the nearby West Texas Intermediate and ultra-low sulfur diesel contracts.
Oil futures was also lent upside support overnight after the dollar weakened to a better than six-week low, with the greenback since reversing modestly higher.
At 9:00 AM ET, NYMEX March West Texas Intermediate futures rose 30cts to $53.05 bbl. ICE March Brent crude futures gained 28cts to $55.51 bbl. NYMEX February ULSD futures advanced 1.01cts to $1.6366 gallon while February RBOB futures eked out a 1.75cts gain to $1.5842 gallon.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
The spot-month WTI contract continues to hold above the $50.71 four-week low traded on Jan. 10, with key support at the $50.26 38.2% retracement point for the November to January rally in front of psychological support at $50.00. ULSD futures with nearest delivery are consolidating between a recent high of $1.7647 and last week's six-week low of $1.6064. Initial support for RBOB futures is marked at $1.5179, with additional support at the $1.4888 50% retracement point for the recent uptrend.
Early gains were also reportedly driven by signs of strong demand from China and bullish rhetoric by the Organization of the Petroleum Exporting Countries and 11 non-OPEC producing countries who said they were following through on their promise to cut production.
OPEC and non-OPEC producers including Russia held a technical meeting in Vienna on Sunday (1/22) to design a framework to ensure compliance with the 1.758 million bpd in production cuts agreed to in deals announced on Nov. 30 and Dec. 10.
Following the meeting, Russia and Saudi Arabia assured a skeptical market that the level of compliance with the planned production cuts exceeded their expectations and they will continue to monitor and ensure strict compliance going forward. Iraqi oil minister Jabar al-Luaibi said that to deliver their share of the cuts, Iraq has cut output from both state-owned oilfield and fields owned by foreign companies.
Still, the 1.5 million bpd in cuts already implemented are 258,000 bpd below target, with Iraq yet to cut its supply another 30,000 bpd in order to fulfill its pledge for a 210,000 bpd supply cut. Also, there remains concern that the OPEC-led cuts were being offset by rising oil shale production by the United States, where the number of active rigs are rising.
The International Energy Agency estimates U.S. shale output would rise by 170,000 bpd this year after a decline of nearly 300,000 bpd last year, while Goldman Sachs sees shale production increasing by 265,000 bpd this year.
George Orwel can be reached at george.orwel@dtn.com
(ES)
Copyright 2017 DTN/The Progressive Farmer. All rights reserved.