Oil Futures Close Lower Monday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Monday afternoon amid pressure from a rebound in Libya's oil production, although losses were curbed by optimism spurred earlier in the session by bullish comments from the head of the Organization of the Petroleum Exporting Countries.

"Libya's restart of the Sharara oil field for the first time in a week, helped to cap market sentiment," said Tim Evans, a specialist at Citi Futures in New York.

Sharara is Libya's biggest oilfield with a 330,000 bpd in production capacity. It was shut on March 27 after a crude pipeline from there to the Zawiya export terminal located west of the capital Tripoli was shut due to militia activity. Today, Mustafa Sanalla, chairman of Libya's National Oil Corp., said the nation's oil output was back to 660,000 bpd after oil production at Sharara resumed over the weekend, up from roughly 500,000 bpd. Sharara now produces 221,000 bpd following the restart, he added.

Sanalla recently said Libya plans to boost production to 800,000 bpd in July, rising to over 1.0 million bpd later this year. Libya is exempt from an OPEC production quota agreement reached last year under which OPEC and 11-non-OPEC oil producing countries pledged to cut their crude output by nearly 1.8 million bpd from Jan. 1 through June 30.

OPEC Secretary General Mohammad Barkindo said on Sunday that he was cautiously optimistic the market was rebalancing and global stockpiles were starting to come down after three months of output cuts under the agreements.

However, increasing U.S. crude oil production and record high domestic crude inventories have made it difficult for OPEC and their allies to draw down global supply fast enough.

U.S. crude production increased in the week-ended March 24 by 18,000 bpd to 9.147 million bpd, a nearly 14-month high, according to the latest data from the Energy Information Administration. U.S. crude stockpiles added 867,008 bbl to a record high of 534.0 million bbl during the same week.

For the final week of March, analysts expect stock draws of 2.0 million bbl for crude, gasoline and distillate fuels, according an early survey by Schneider Electric. The inventory data are due late Tuesday from the American Petroleum Institute and Wednesday morning from EIA.

At settlement, May NYMEX WTI futures were down 36cts at $50.24 bbl while IntercontinentalExchange June Brent crude futures eased 41cts at $53.12 bbl, reversing off a $53.74 fresh three-week high on the spot continuation chart. May Brent futures expired Friday afternoon.

In products trade, NYMEX May ULSD futures settled 1.12cts lower at $1.5634 gallon, reversing off a fresh three-week spot high of $1.5872, and NYMEX May RBOB futures eased 0.93cts to $1.6937 gallon, moving off a fresh three-week spot high of $1.7150.

Both April ULSD and RBOB futures contracts expired Friday afternoon, with RBOB futures moving into backwardation as May delivery rolled into the nearest delivered position. The transition to a bullish market structure comes during seasonal refinery maintenance and ahead of peak driving demand during the summer months.

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