Oil Futures Settle Mixed Thursday

Oil Futures Settle Mixed Thursday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mixed Thursday after seesawing within a tight range as bearish data showing excess U.S. oil supply weighed against talk that nearly half of the Organization of the Petroleum Exporting Countries' 13 members have agreed to extend their production cut of 1.2 million barrels per day (bpd) beyond the June 30 expiration.

"OPEC jawboned the market, but with expiration of the May WTI contract today, and the technical damage we did yesterday, nobody wanted to jump back in," said analyst Phil Flynn at Price Futures. "Momentum was with the bearish yesterday but they were unable to take out $50 per barrel (bbl), which is a psychological boost. From that viewpoint the downside correction might be over."

The market rallied during overnight trade off Wednesday's two-week lows for May West Texas Intermediate crude and ULSD futures and a three-week low for RBOB futures after Khalid al-Falih, Saudi Arabian oil minister, said there is an "initial agreement" by the Gulf Cooperation Council to extend the production cuts because OPEC has not achieved their goal of bringing down global supplies to within their five-year average.

However, Falih noted that the entire OPEC membership has not yet agreed to the extension, with OPEC planning to meet on May 25 to decide the issue. GCC comprises Saudi Arabia, Kuwait, Qatar, UAE, Oman and Bahrain and they often follow the Saudi lead. Iran and Venezuela, both members of OPEC, have also expressed support for an extension of the output cuts.

Non-OPEC Russia has not indicated whether it would go along with the plan to extend the cuts. Russia along with 10 other non-OPEC producers agreed with OPEC to cut their production by 558,000 bpd from January through June, bringing the total supply cuts by the producers to 1.758 million bpd.

Some analysts doubt OPEC would succeed in ridding the current oil supply glut given growing U.S. production. The Energy Information Administration on Wednesday showed U.S. crude production rose 17,000 bpd to a 19-month high of 9.252 million bpd during the week-ended April 14, up nearly 300,000 bpd versus a year ago.

U.S. oil producers have added rigs to the oil patch for 13 straight weeks already, bringing the total number of rigs to a two-year high of 683 during the week-ended April 14, according to the latest report by Houston-based oil services firm Baker Hughes, Inc. Baker Hughes' rig-count report for this week is set for release Friday afternoon.

Total crude stocks at 532.3 million bbl on April 14 are 25 million bbl higher than a year ago, according to EIA.

Flynn said the oil market is concerned over rising U.S. supply. He also said the French presidential elections over the weekend "might keep the bulls out of the market" next week.

Francisco Blanch, head of global commodities at Bank of America/Merrill Lynch, said while gasoline and distillate fuel demand eased last week, airline consumption of jet fuel is strong and road trucks are using more diesel fuel as the economy improves.

EIA reported gasoline demand fell by 52,000 bpd, distillate demand plunged 458,000 bpd while jet fuel demand increased by 311,000 bpd last week. Cumulatively this year through April 14, implied gasoline demand has averaged 8.847 million bpd, down 3.7% versus the comparable year-ago period, with distillate fuel demand at 4.033 million bpd is up 11.4% against the 2016 timeframe. Jet fuel demand has averaged 1.615 million bpd this year, up 4.4% compared with year ago.

The May WTI crude futures contract expired 17 cents lower at $50.27 bbl after inside trade. On Wednesday, the May WTI contract dropped to a $50.09 two-week low, slipping below $50.38 support. The June WTI futures contract settled 14 cents lower at $50.71 bbl.

IntercontinentalExchange June Brent crude was little changed, up 6 cents at a $52.99 bbl settlement, after bouncing off Wednesday's $52.58 three-week spot low, with the trans-Atlantic arbitrage up 23 cents at a $2.72 bbl premium over WTI. NYMEX May ULSD futures were 0.24 cent lower at a $1.5789 gallon settlement, and NYMEX May RBOB futures gained 1.15 cents to a $1.6705 gallon settlement.

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