Oil Higher in Friday Trade
NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved higher Friday morning, rebounding from recent losses that pressed West Texas Intermediate crude and ULSD contracts to one-month lows and the RBOB contract to a two-month low.
Today's gains were underpinned by a weaker dollar, technical support and renewed hope the Organization of the Petroleum Exporting Countries plus their 11 non-OPEC allies would extend their agreement to cut production by nearly 1.8 million bpd for another six months after the current quota scheme expires on June 30.
Senior OPEC officials have sounded as if the plan to extend the output cuts is almost a done deal, giving the market confidence there could be an agreement later next month. OPEC Secretary-General Mohammad Barkindo said Thursday that the global market would rebalance during the second half of 2017, while Iraqi officials said they would support the plan to prolong output cuts if a majority chose to do so. More than half of the 13 OPEC members have already agreed to the plan, including Saudi Arabia.
Also, non-OPEC Russia said that it has now fully complied with its pledge to cut 300,000 bpd.
Saudi Arabian energy minister Khalid al-Falih today welcomed Russia's contribution to the effort to rebalance the market, saying that the 11 non-OPEC partners have an 85% compliance rate with the cuts. Falih is working to convince Moscow to support the plan to extend the production cuts.
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OPEC meets on May 25 in Vienna. Unless they extend the output cuts to December, it will take longer to rid the market of the global supply glut because rising U.S. production is replacing a portion of the cuts by OPEC and non-OPEC producers.
Some of the current global excess supply is also due to the fact that OPEC members moved a lot of crude to consumers right before the current production cuts kicked-in on Jan. 1, Ed Morse, an analyst at Citigroup recently said.
U.S. crude production rose to a 9.265 million bpd 20-month high in the week-ended April 21, up 15% versus five-year average, and crude stocks at 528.7 million bbl were 120.6 million above five-year average, the Energy Information Administration data on Wednesday.
The market is bracing for the latest U.S. oil rig count report from oil services company Baker Hughes, Inc. that is expected to be issued this afternoon. The number of oil rigs has increased for 14 straights weeks.
NYMEX May RBOB and ULSD futures contracts expire this afternoon along with June Brent crude futures on the IntercontinentalExchange, and so paper traders will focus on squaring positions.
The June Brent contract has lost 2% this month while RBOB futures are down 7.3% and the ULSD contract is 3.6% lower, with May WTI down about 2.2%. The selloff has been intense during the second half of April, but the market showed signs of stabilizing overnight after the spot-month oil contracts moved back above support points.
At 9:00 AM ET, NYMEX June WTI crude futures gained 50cts to $49.47 bbl, rebounding after posting a one-month spot low of $48.20 on Thursday, with support holding at $48, but the contract remains below the psychologically important $50 mark.
Technical analysts are looking to see if the WTI contract closes above $50 bbl this afternoon, which would provide support for a further upside move. A rally of that nature would depend on the RBOB futures contract, which has so far been the weakest segment of the oil futures complex recently, although RBOB is the strongest part of the complex today, according to analyst Brian LaRose at ICAP in Jersey City, N.J.
NYMEX May RBOB futures climbed 2.66cts to $1.5766 gallon, bouncing off a $1.5390 two-month spot low posted on Thursday ahead of expiration this afternoon, with the June contract up 2.37cts to $1.5780. Support for the May RBOB contract is holding at $1.53.
NYMEX May ULSD futures edged up 0.93cts to $1.5165 gallon, reversing off Thursday's $1.4909 one-month spot low ahead of expiration this afternoon. The June ULSD contract is up 0.95cts at $1.5211.
The ICE June Brent crude contract gained 33cts to $51.77 bbl ahead of its expiration, having reversed off a $50.45 fresh one-month spot low posted Thursday. The July Brent contract was up 53cts at $52.77 bbl. The trans-Atlantic arbitrage remains little changed at a $2.30 bbl Brent premium to WTI for the June contracts.
George Orwel can be reached at george.orwel@dtn.com
(CZ)
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