Oil Mixed in Thursday Trade

NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures moved mixed after starting regular trade higher Thursday on a weaker dollar and mounting evidence the Organization of the Petroleum Exporting Countries and non-OPEC producers are following through on pledges to cut output that has largely overshadowed a large weekly increase in U.S. oil supplies.

Recent reports and surveys showing that OPEC has enacted 82% to 88% of the 1.2 million bpd planned cuts has generated bullish sentiment that is proving durable in the oil futures market despite the fact that non-OPEC producers have not shown the rate of their compliance with their 558,000 bpd in agreed to output cuts.

A Reuters' survey on Tuesday showed Russia has implemented only a third of its 300,000 bpd planned production cuts. Yet optimism has kept NYMEX West Texas Intermediate crude and IntercontinentalExchange Brent crude futures within the trading ranges of $50 to $55 bbl and $53 to $58 bbl, respectively.

In addition, fresh concern over geopolitical tensions is adding a risk premium to the global oil price after Michael Flynn, President Donald Trump's national security advisor, said Wednesday that the United States was officially putting Iran on notice after Tehran test-fired a ballistic missile over the weekend.

Flynn noted Iran's missile launch on Sunday was in defiance of a United Nations Security Council resolution that called on Tehran not to undertake any activity related to ballistic missiles capable of delivering nuclear weapons.

However, the upside for oil futures has been capped by the continued increase in U.S. supply. The Energy Information Administration on Wednesday reported builds in domestic petroleum inventories for the week-ended Jan. 27, including a 6.5 million bbl spike in crude oil stockpiles.

In early trade, NYMEX March West Texas Intermediate futures added 28cts to $54.16 bbl, off a $54.34 four-week high on the spot continuation chart. ICE April Brent crude futures rose 40cts to $57.20 bbl, off a three-week spot high of $57.45.

NYMEX March ULSD futures rose 1.37cts to $1.6877 gallon, off a three-week spot high of $1.6938. March RBOB futures gained 0.17cts to $1.5808 gallon, off a fresh one-week spot high of $1.5919. At last look, the RBOB contact reversed lower.

RBOB futures remains the weakest segment of the oil complex after EIA reported a 3.9 million bbl stock build for gasoline for the week-ended Jan. 27.

In currency trade, the dollar's value fell this morning to the lowest level since mid-November relative to other major currencies after the Federal Reserve on Wednesday left interest rates unchanged and gave no signal of a hike in March.

The central bank appears to be waiting for clarity on Trump's fiscal policies, adding another wrinkle to the uncertainty caused by his recent comments and decisions on trade, immigration and currency values.

The oil market now awaits Baker Hughes Inc.'s rig count report for this week due out on Friday. Last week's report showed the number of active oil rigs increased by 15 to 566, the most in over a year, and EIA data shows U.S. crude oil production is near a 10-month high.

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