Oil Settles Mixed Friday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled shallowly mixed Friday afternoon, bringing the curtain down on April trading with the May West Texas Intermediate crude contract posting a modest session gain while lower on the week and the month.

It was the second straight weekly loss for WTI as the oil futures complex came under selling pressure from the 10th straight weekly rise in U.S. oil production and a 15th straight weekly increase in the number of oil rigs deployed across the nation's oil patch.

Houston-based oil services firm Baker Hughes, Inc. said the U.S. rig-count rose by nine this week to a 697 two-year high while the Energy Information Administration midweek showed U.S. crude production advanced to a 9.265 million bpd 20-month high in the week-ended April 21, 15% higher than its five-year average. At 528.7 million bbl, crude oil stocks are 19.4% higher on the year and 120.6 million above five-year average.

However, oil futures losses were limited by growing optimism the Organization of the Petroleum Exporting Countries would prolong its current agreement to cut production by 1.8 million bpd until December in an attempt to bring down inventories to within their five-year average. Mohammad Barkindo, secretary-general of the group, said the market would come into balance during the second half of this year.

The 13 member OPEC, which meets May 25, touted its determination to achieve its goal of ridding the oil market of excess supply. The Joint Ministerial Monitoring Committee, charged with the task of assessing compliance with the production cuts, announced in a statement today that OPEC and their 11 non-OPEC allies participating in the output cuts achieved a 98% conformity level in March, up 4% from February.

To ensure there's an agreement to extend the cuts, Saudi Arabian oil minister Khalid al-Falih said he will go to Moscow in the next two weeks to convince Russia to back the plan. He's optimistic that Moscow would agree after Russia announced today that they have fully complied with their pledge to cut production by 300,000 bpd during the first half of 2017. The majority of OPEC members already back the plan to extend output cuts.

After spot-month WTI and ULSD futures contracts fell to one-month lows while the RBOB futures contract posted a two-month low on Thursday amid soft demand and higher supply, the market rebounded overnight amid technical support with "recent lows holding" firm, according to Tom Bentz, vice president for energy derivatives at ABN AMRO.

"The momentum shifted because the market was getting oversold," Bentz said. "People got concerned about getting short ahead of the weekend with the market just above support levels."

NYMEX June WTI crude futures settled 36cts higher at $49.33 bbl after trading on either side of Thursday's settlement, settling below the psychological $50 level but support held at the recent low of $47.80. The contract remains in "no man's land" and could go either way next week, said Bentz. WTI was down 0.7% on the week and down 2.5% on the month.

IntercontinentalExchange June Brent crude contract gained 29cts to a $51.73 bbl expiration, reversing off Thursday's $50.45 fresh one-month spot low. The contract was down 23cts for the week and is 2.1% lower for the month while trading at a $2.40 bbl premium to WTI, a one-week low. The July contract settled up 23cts at $52.05.

May products futures that expired today settled a touch lower after giving up early gains amid position squaring. NYMEX May RBOB futures expired down 0.20cts at $1.5480 gallon after bouncing around, and off Thursday's $1.5390 two-month spot low. The May RBOB contract tested support at $1.53 and posted a 5.8% loss for the week and an 8.9% loss for the month. The June contract settled down 0.62cts at $1.5481 gallon.

NYMEX May ULSD futures edged down 0.32cts to an $1.5040 gallon expiration, reversing off Thursday's $1.4909 one-month spot low. The May contract was down 3.2% on the week and 4.4% for the month, with the June ULSD contract settling down 0.44cts at $1.5072.

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