Oil Lower in Monday Trade
NEW YORK (DTN) -- New York Mercantile Exchange oil futures gave up overnight gains and eased Monday morning amid technical pressure and concerns about rising U.S. oil output that has undercut efforts by the Organization of the Petroleum Exporting Countries to bring the global market back into a supply-demand balance.
The market was under pressure after the June West Texas Intermediate crude oil futures contract last week broke below psychological support at $50 and attracted speculative long liquidation, with the latest rig count report from Houston-based oil services firm Baker Hughes, Inc. showing domestic oil drillers activated new wells for a 14th consecutive week.
Domestic oil production has been rising consistently since the recent trough at 8.46 million bpd posted during the week-ended July 29. U.S. production rose by 17,000 bpd to 9.252 million bpd during the week-ended April 14, the highest in some 20 months, and is up 299,000 bpd from a year ago, according to the Energy Information Administration.
Meantime, OPEC and 11 non-OPEC oil producers are discussing a plan to extend the production cuts for six more months after June 30. Saudi Arabia said last week that six OPEC members have agreed to extend the cuts, but they still have to convince the entire OPEC membership and non-OPEC Russia to go along. OPEC meets May 25 to make that decision.
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Total U.S. crude inventories at 532.3 million bbl on April 14 were 25.0 million bbl higher versus a year ago and 126.8 million bbl above their five-year average.
On products, the latest monthly report by the American Petroleum Institute shows gasoline deliveries dropped 2.5% during the first quarter compared with same period a year ago. However, deliveries of the fuel averaged 9.2 million bpd in March, up 4.3% from month prior and 1.7% lower than March 2016.
The API data compares with EIA data from last week that showed gasoline demand declined 52,000 bpd to 9.223 million bpd during the week-ended April 14, down 2.3% versus the same week in 2016, EIA reported. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million bpd, down 0.7% from the same period last year.
With the spring season underway, the heating oil season is over, and EIA data last week showed demand for the fuel plunged 458,000 bpd to 4.177 million bpd during the second week of April, 2.3% below the same week a year ago.
In overnight trade, oil futures rose as part of an overall relief rally across many markets while the dollar fell to a one-month low following results of the first round of French presidential election won by Emmanuel Macron.
Macron, who is now tipped to win the second round vote on May 7, is a former banker campaigning on a centrist, pro-European Union, free-trade platform, so there's no risk of a euro-break up with him as president. The overnight rally has faded in the oil market as traders refocus on fundamentals.
In early trade, June WTI crude futures were 34cts lower at $49.28 bbl. The contract knocked down support at $49.59 and posted a $49.20 three-week spot low last Friday. IntercontinentalExchange June Brent crude was 26cts lower at $51.70 bbl, testing support at $52.36. The trans-Atlantic arbitrage rose 8cts to a $2.42 bbl premium over WTI.
NYMEX May ULSD futures were fractionally lower at $1.5490 gallon, trading near Friday's three-week low of $1.5427 after punching through support at $1.5485. NYMEX May RBOB futures lost 1.76cts to $1.6269 gallon, off a $1.6268 near one-month spot low.
George Orwel can be reached at george.orwel@dtn.com
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