Oil Futures Settle Mixed

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange settled mixed with an upside bias Tuesday afternoon, with West Texas Intermediate crude and ULSD futures supported by bullish comments discussing strong compliance with production quotas by the Organization of the Petroleum Exporting Countries from its Secretary General.

Mohammad Barkindo said OPEC members have shown seriousness in their efforts to rebalance the global oil market by cutting 90% of the 1.2 million barrels per day (bpd) in production cuts agreed to on Nov. 30 during the first month of implementation. He now expects full compliance, with the six-month agreement to expire on June 30.

"I've got commitment from the highest levels of governments that they will implement and [fulfill] their obligations fully, and achieve their targeted cuts and Iraq is no exception," Barkindo said in an interview with Bloomberg television.

"The market has demonstrated confidence in us to fully implement the cuts," said Barkindo, which has spurred hedge funds and other speculators to add long positions in the futures market despite rising U.S. oil production.

The bullish sentiment was recently strengthened on reports some OPEC members want the current production cuts to be extended beyond June, probably through December, to counter U.S. oversupply. WTI futures have, nonetheless, been range bound between $50 and $55 per barrel (bbl).

In addition to the OPEC output agreement, 11 non-OPEC nations also agreed on Dec. 10 to slash their output by 558,000 bpd. The compliance rate for the non-OPEC producers has been difficult to ascertain, although Russia has now set up a monitoring mechanism that should be reporting the country's data soon.

"While Barkindo's statement puts a confident spin on fundamentals, we'd say questions do remain, given Iran seems to be signaling increased production rather than improved compliance," said analyst Tim Evans at Citi Futures.

At settlement, NYMEX March West Texas Intermediate futures gained 66 cents to a $54.06 bbl expiration, off a seven-week spot high of $54.68, while the April contract was up 55 cents at $54.33 bbl.

On the IntercontinentalExchange, April Brent crude futures gained 48 cents to settle at $56.66 bbl, off a $57.31 three-week high.

NYMEX March ULSD futures eked a 0.61 cent gain at $1.6425 gallon, off a near two-week high of $1.6750, while NYMEX March RBOB futures reversed lower, settling down 2.26 cents at $1.4940 gallon.

An early survey of analysts shows expectations that a 4.0 million bbl build occurred in U.S. crude oil inventories for the week-ended Feb. 17 while gasoline and distillate supplies are seen down by about 2.0 million bbl each.

The American Petroleum Institute will publish its data for the week-ended Feb. 17 to clients at 4:30 PM ET Wednesday, and the Energy Information Administration at 11:00 AM ET Thursday, with both weekly reports delayed a day by Monday's federal holiday.

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