Oil Futures Settle Near-Flat Thursday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were little changed at Thursday's settlement following sideways trade, with volume very thin ahead of Good Friday and the Easter holiday weekend. May West Texas Intermediate crude shook off early weakness to close a tad higher, with the RBOB and ULSD contracts posting modest losses for the day. WTI and ULSD futures ended the week higher.

The choppy price action follows a report issued early this afternoon by Houston-based oil services firm Baker Hughes, Inc. showing the number of rigs drilling for oil in the United Stated rose for a 13th straight week to 683, up 11 on the week to the highest level in two years. So far, 158 more rigs have been deployed into the U.S. oil patch this year.

Earlier, The International Energy Agency countered its projection of slowing global demand growth for this year with data showing global supply fell last month. IEA forecasted global demand growth of 1.3 million barrels per day (bpd) for 2017, the second consecutive annual decline in the growth rate following weaker-than-expected first-quarter demand.

The report said world oil supply dropped 755,000 bpd in March largely because the Organization of the Petroleum Exporting Countries and their non-OPEC oil producing partners pumped less, pursuant to their agreement last year to cut output by nearly 1.8 million bpd during the first half of the year. However, total non-OPEC output is set to increase again, with growth of 485,000 bpd projected for 2017, after a decline of 790,000 bpd last year.

"It was a pretty flat day [for oil futures] and I think the rig count report took away any chance of an upside momentum, but there was also a reluctance to go [into] the weekend short given there's a lot of geopolitical risks," said analyst Phil Flynn at Price Futures. "The real story for me this week is the fact that overall inventories were down versus a year ago, which shows the global market is tightening not just for crude, but also products."

David Thompson, executive vice president at Powerhouse, a Washington, D.C., brokerage, agreed. "The crude oil market has been up 11 out of the last 13 days," Thompson said. "We have paused the last two days. This pause is not completely out of character after a market has had such a strong move. But I think it was instructive that the [WTI] market closed [up]. I think given the geopolitical tensions, I am not surprised to see some people getting long before the weekend."

The oil futures rally that started last week stalled Wednesday after the Energy Information Administration reported that U.S. crude oil production rose by 36,000 bpd to 9.235 million bpd last week, up 258,000 bpd versus a year ago and 1.27 million bpd above their five-year average. Also, crude stocks at the Cushing terminal in Oklahoma, rose by 300,000 barrels (bbl) to a fresh record high of 69.4 million bpd.

The oil futures market has been buoyed this week by bullish sentiment, technical support, renewed geopolitical risks and expectations OPEC will extend its production cuts beyond June. After reaching multi-week highs this week, with the market back to the January-February trading ranges reached after the OPEC supply curbs were implemented, technical resistance capped further gains.

The May WTI futures contract settled up 17 cents to $53.18 bbl after inside trade, and is up 94 cents for the week. ICE June Brent contract was flat, up 3 cents at a $55.89 bbl settlement after sideways trade, posting a 64 cents weekly gain.

NYMEX May ULSD futures were down 0.25 cent at a $1.6495 gallon settlement, up 2.11 cents for the week. The NYMEX May RBOB futures contract eased 0.68 cent to a $1.7349 gallon settlement, down 1.13 cents for the week. The May RBOB contract has flipped back to a modest discount versus the June contract.

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