NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures extended higher at the start of regular trade Wednesday morning ahead of the midmorning release of the Energy Information Administration's oil report that covers the week-ended Jan. 27 that's expected to show a stock draw for domestic refined oil products and a build for crude oil.
The futures complex rose in premarket trade after traders discounted a bearish weekly oil supply report issued Tuesday by the American Petroleum Institute, and focused on the strong compliance with oil production cut agreements by the Organization of Petroleum Exporting Countries and non-OPEC producers.
"There are too many questions about the API report, which has often been out of synch with EIA, so we are just waiting for the EIA data," said analyst Phil Flynn at Price Futures.
A survey today by Reuters showed Russia has cut its output by 100,000 bpd, or a third of the 300,000 bpd in supply it had promised to cut. Moscow said however it plans to gradually reduce output until it meets the target.
On Tuesday, Reuters reported an 82% compliance rate by OPEC producers, and a separate report from JBC Energy today said OPEC has reduced production by 1.056 million bpd, reflecting a compliance rate of 88%.
Taken together, OPEC appears to be doing a better job of cutting production than its non-OPEC partners, but all of the producers are well on their way to fulfilling their promises and could achieve their goal of rebalancing global market by June despite rising crude oil production from the United States, said analysts.
"The strong compliance by OPEC is very significant but that's just one of the issues driving the market higher," said Flynn. "We hear that the Buzzard crude pipeline in the North Sea won't return to full capacity any time soon. It has been running at reduced capacity for some time, but was supposed to come back on line."
NYMEX March West Texas Intermediate futures rose 53cts to $53.34 bbl. ICE April Brent crude futures were up 60cts at $56.18 bbl after the March contract expired on Tuesday. NYMEX March ULSD futures advanced 2.27cts to $1.6535 gallon and March RBOB futures surged 3.14cts to $1.5815 gallon, after the March products contracts expired on Tuesday.
Late Tuesday, API reported a more-than-expected 5.8 million bbl stock build for crude, an unexpected stock build of 2.9 million bbl for gasoline and a surprise increase of 2.3 million bbl in middle distillate stockpiles.
ADP Employment Services this morning released its jobs report showing 246,000 private sector jobs were created in January, beating a market forecast for 165,000 new jobs. The jobs report boosted investor sentiment, suggesting the U.S. economy is strong and could support oil demand growth going forward. The Bureau of Labor Statistics will issue its payroll report for January on Friday.
George Orwel can be reached at email@example.com
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