Oil Lower in Thursday Trade
NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures cascaded lower Thursday morning to fresh lows on bearish technical pressure and rising U.S. crude oil production and total petroleum inventories that prompted the market to ignore attempts by the Organization of the Petroleum Exporting Countries to jawbone the market higher with bullish comments.
The Energy Information Administration on Wednesday reported U.S. crude production rose 13,000 barrels per day last week to a 9.265 million bpd 20-month high, 15% above its five-year average. Commercial crude stocks at 528.7 million barrels are 120.6 million above their five-year average despite refinery utilization rising to a 94.1% rate, the highest this year and above its five-year average.
On demand, the EIA report showed total U.S. products supplied over the last four-week period averaged over 19.5 million bpd, down 2.2% from the same period last year amid building product supplies. Over the last four weeks, gasoline demand averaged about 9.2 million bpd, down 1.8% on the year. Distillate demand averaged about 4.1 million bpd over the last four weeks, up 4.5% versus a year ago.
The domestic oil supply glut has overshadowed signs OPEC and 11 non-OPEC producers are laying the groundwork to prolong their agreement for oil production cuts of nearly 1.8 million bpd to December. The current supply agreement is set to expire June 30, but OPEC hopes to finalize a deal to extend the quota scheme when it meets on May 25 in Vienna.
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This morning, OPEC Secretary-General Mohammad Barkindo told Bloomberg television that the global market will rebalance during the second half of 2017, suggesting that extending the production cuts beyond June is a foregone conclusion within OPEC.
More than half of the 13 OPEC members have already agreed to the plan to extend the production cuts. They are Iraq, Iran, Venezuela, Saudi Arabia, Kuwait, the United Arab Emirates and Qatar. Ecuador and OPEC members from Africa -- Nigeria, Angola, Algeria, Libya and Gabon -- have not indicated their preference yet, although they have often followed consensus opinion.
Saudi Arabian energy minister Khalid al-Falih and Venezuela's new oil minister Nelson Martinez said on Wednesday they intend to visit Moscow over the next two weeks to convince Russia to roll over the current oil production cuts through the second half of the year.
Russia is one of the 11 non-OPEC producers that agreed to cut output by 558,000 bpd in support of the OPEC effort to rid the market of excess supply, but Moscow hasn't fully followed through on their pledge to cut 300,000 bpd of its production during the first half of 2017 and warned early this week that they could boost their production to a new high in July if there's no agreement to extend the current quota scheme.
Meantime, spot-month oil futures recently slipped below their respective technical support levels, and have attracted additional selling pressure. Such technical downside risk plus the longer it takes to rebalance supply and demand could trigger another liquidation of length soon, analysts said.
"There's a lot of technical pressure with gasoline leading lower despite what bullish analysts would have you believe, although it's still not certain whether we are heading for a correction," said Brian LaRose, a technical analyst at ICAP in Jersey City, N.J., said Thursday morning.
NYMEX May RBOB futures tumbled 4.35cts to $1.5468 gallon at last look, off a $1.5444 two-month spot low ahead of its Friday expiration, with the June contract down 4.38cts to $1.5506. Technical support for the May RBOB contract is set at $1.53 to $1.51, which could be taken out before Friday's expiration, which would then set up a $1.4470 target, said LaRose. Support for the June RBOB contract is now pinned at $1.5030, which if it slips under by the end of trade on Friday could set up the next target at $1.4590 to $1.4370.
NYMEX May ULSD futures dropped 3.66cts to $1.5001 gallon at last look, off a $1.4988 fresh one-month low on the spot continuation chart, with the June contract down 3.67cts at $1.5050.
NYMEX June WTI crude futures were $1.04 lower at $48.58 bbl in early trade, down for the fourth consecutive session, having posted a one-month low on the spot continuation chart of $48.51. The WTI contract is expected to test support at $48, which if it takes out would set up a target of $45.50.
The IntercontinentalExchange June Brent crude contract fell $1.07 to $50.75 bbl, off a $50.60 fresh one-month spot low and ahead of its expiration on Friday, with the July Brent contract down $1.07 at $51.21 bbl.
George Orwel can be reached at george.orwel@dtn.com
(CZ)
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