Oil Mixed in Tuesday Trade

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved mixed Tuesday morning after mostly trading lower following Monday's losses amid concern rising oil production in the United States would offset a portion of the production cuts being made by the Organization of the Petroleum Exporting Countries and 11 non-OPEC producers.

The downside was limited by a weaker dollar and a report by the International Monetary Fund raising global economic growth expectations for this year. The IMF is now projecting a 3.5% global growth rate, revised up 0.1%, with a growing economy seen boosting oil demand. IMF, in particular, sees strong growth in China, Japan and in the United Kingdom.

The IMF forecast coincided with expectations by Citigroup and Goldman Sachs that crude prices would top $60 bbl during the second half of 2017.

The May West Texas Intermediate crude futures contract was down 27cts at $52.38 bbl early Tuesday, off a better than one-week low of $52.14, with the May contract expiring Thursday afternoon (4/20). June WTI futures are trading at a roughly 50cts premium to the expiring May contract.

On the IntercontinentalExchange, June Brent crude was down 32cts at $55.04 bbl, off a better than one-week low of $54.76, and trading at a $2.66 bbl premium over WTI.

May ULSD futures were down 0.99cts at $1.6230 gallon while NYMEX May RBOB futures dropped 1.64cts to $1.7032 gallon, off a two-week low of $1.6988.

On Monday, the Energy Information Administration issued its Drilling Productivity Report for April estimating that oil production from seven major U.S. shale plays would increase by 124,000 bpd to 5.193 million bpd in May from April, while natural gas production would climb 501 million cubic feet per day to 50,089 MMcf/d. The estimate puts shale oil production at the highest since 2015.

The EIA's drilling productivity report has forecasted an increase in oil shale output every month so far this year. This report came on the heels of data released Thursday (4/13) by Houston-based oil services firm Baker Hughes, Inc. showing the number of domestic oil rigs rose for a 13th straight week, up 11 last week to a 683 two-year high and 332 higher than a year earlier.

EIA's Weekly Petroleum Status Report issued last week also showed U.S. oil production increased 36,000 bpd to a 15-month high of 9.235 million bpd during the first week of April, while total crude oil inventories at 533.4 million bbl were 5.6% higher than a year earlier.

A new Schneider Electric survey this morning shows the market expects stock draws of 2.0 million bbl for both crude and gasoline and a stock decline of 1.3 million bbl for distillates for the week-ended April 14.

Wall Street investment banks Citigroup and Goldman Sachs said in their analyst reports that the OPEC output cuts would more than offset the rise in U.S. production, and, as a result, supply would tighten over the next six to nine months and prices of NYMEX WTI and ICE Brent will climb by $10 to averages of $62 and $65 bbl, respectively. Their projections are based on expectations OPEC would extend output cuts through December.

In currency trade, the dollar fell to a near three-week low versus other currencies after British Prime Minister Teresa May announced snap elections in Westminster that's expected to give her a larger parliamentary majority and strengthen her hand in her negotiations for Britain's exit from the European Union.

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