Oil Lower in Friday Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures retreated at the start of regular trade Friday morning in front of industry data on the weekly change in the oil rig count in the United States and ahead of a three-day weekend break in trading.

At 9:00 AM ET, NYMEX March West Texas Intermediate futures fell 34cts to $53.02 bbl ahead of its expiration Tuesday (2/21), while the April contract was down 37cts at $53.38 bbl. On the IntercontinentalExchange, April Brent crude futures eased 37cts to $55.28 bbl.

NYMEX March ULSD futures were 1.30cts lower at $1.6161 gallon, while NYMEX March RBOB futures lost 3.53cts to $1.4894 gallon, near a $1.4877 fresh one-week low.

The lower trade comes as the market contemplates building U.S. oil inventory and growing crude production that are offsetting data showing overall good compliance by the Organization of the Petroleum Exporting Countries in meeting their six-month agreement to cut 1.2 million bpd in their output, and reports that OPEC might extend the production cuts beyond June 30.

The Energy Information Administration midweek reported domestic crude output flat at an 8.977 million bpd 10-month high during the week-ended Feb. 10, while crude inventory spiked 9.5 million bbl to 518.1 million bbl, 45.3 million bbl or 9.6% above year prior.

The market now awaits rig-count data for the week-ended today from oil services firm Baker Hughes, Inc. that will be released at 1:00 PM ET.

The report for the week-ended Feb. 10 showed an eight-rig increase in the number of active oil rigs in the United States to a total of 591, the fourth consecutive weekly build, and to the highest count since late October 2015.

Analysts said the domestic supply increase is undermining the 1.758 million bpd in production cuts by OPEC and non-OPEC producers, which is meant to rebalance the market. Wire reports Thursday said OPEC could consider extending its production cuts for another six months after the initial agreement expires on June 30.

So far, surveys and reports have shown OPEC following through on its pledge to cut output. On Monday, citing secondary sources, the cartel reported its crude output declined 890,000 bpd to 32.14 million bpd in January, which is below the 32.5 million bpd production ceiling OPEC agreed to on Nov. 30, 2016 that took effect Jan. 1, but less than the pledged 1.2 million bpd cut. The International Energy Agency last week reported an OPEC compliance rate at 90% in January.

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