NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved shallowly mixed with an upside bias Wednesday morning ahead of a weekly oil report by the Energy Information Administration due out at 10:30 AM ET that's expected to show petroleum stock draws occurred last week.
Oil futures recently seesawed and then steadied in premarket trade on bullish comments from the head of the Organization of the Petroleum Exporting Countries offset data released late Tuesday by the American Petroleum Institute showing an unexpected increase in U.S. gasoline inventories and a less-than-expected crude oil stock draw.
OPEC Secretary-General Mohammad Barkindo earlier today said that oil producers taking part in the 1.8 million bpd production cut agreement are committed to bringing global oil inventories down to their five-year average in an effort to restore stability to the market. Barkindo, who was speaking at a conference in the United Arab Emirates, said March compliance data shows better conformity by OPEC with the agreement than in February, and they are closer to ending global oversupply.
OPEC and 11 non-OPEC producers agreed late last year to cut production for six months effective Jan. 1, helping lift NYMEX WTI crude oil futures prices to a range of $50 to $55 bbl and IntercontinentalExchange Brent futures to a range of $53 to $58 bbl after a two-year slump.
But rising U.S. crude production and oversupply has undermined those cuts by OPEC and their non-OPEC partners. Barkindo said OPEC will meet on May 25 to decide whether the supply pact should be extended for another six months after its June expiration, but he didn't indicate his preferred outcome.
Several OPEC nations have called for an extension of the supply cuts and top exporter Saudi Arabia is open to the idea, but non-OPEC Russia is reluctant and, as a result, there's uncertainty regarding whether the cuts would continue during the second half of the year.
In the United States, API late Tuesday reported that crude inventories were drawn down by 840,000 bbl during the week-ended April 14, while gasoline supplies increased by 1.4 million bbl and middle distillates stocks fell by 1.8 million bbl.
The market expected crude stocks to decline by 2.0 million bbl, with gasoline stocks seen down 2.0 million bbl and distillate stocks seen down 1.3 million bbl. Traders will keep an eye on production data to see if output continues higher. EIA's report released last week 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.
In early trade, NYMEX May WTI crude futures were up 7cts at $52.48 bbl, with the contract set to expire Thursday afternoon. June WTI futures, which traded at a 40cts premium to the May contract, was 3cts higher at $52.88 bbl. IntercontinentalExchange June Brent crude gained 9cts to $54.98 bbl, trading at a $2.50 bbl premium over WTI. NYMEX May ULSD futures edged up fractionally at $1.6247 gallon while NYMEX May RBOB futures eased fractionally to $1.7046 gallon.
In currency trade, the U.S. dollar index bounced off a three-week low, edging higher along with equities on Wall Street. Oil futures have an inverse trading relationship with the dollar while equities reflect investor sentiment.
George Orwel can be reached at email@example.com
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