Oil Lower in Monday Trade
NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved lower on Monday morning amid technical trading and concern about rising drilling activity and oil production in the United States that continued to overshadow efforts to bring down global crude oil supply to its five-year average.
Oil services firm Baker Hughes, Inc. on Friday reported the number of oil rigs deployed in the nation's oil patch rose nine to a two-year high of 697 during the week-ended April 28, the 15th straight weekly increase, with rigs now up 365 versus a year ago.
Oil production rose 66,000 bpd during the three weeks of April to 9.265 million bpd, U.S. Energy Information Administration's data shows, with petroleum stockpiles rising 6.6 million bbl during the week-ended April 21. EIA showed total products supplied for the four weeks to April 21 averaged more than 19.5 million bpd, down 2.2% from the same period last year.
The relentless increase in U.S. oil supply is making it difficult for the Organization of the Petroleum Exporting Countries to clear the global oil surplus. The International Energy Agency reported in its Oil Market Report issued on April 13 that oil stocks held by the Organization for Economic Cooperation and Development, which is made up of consuming industrialized nations, were about 330 million bbl above the five-year average, an important indicator for OPEC.
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OPEC and 11 non-OPEC producers will meet May 25 to discuss extending their agreement to cut production by nearly 1.8 million bpd for another six months after the current quota scheme expires on June 30. OPEC secretary-general Mohammad Barkindo said last week that the rate of compliance with the agreement reached 98% in March for both OPEC and non-OPEC.
The oil futures complex came under additional downward pressure after a survey showed Sunday that growth in China's manufacturing sector slowed more-than-expected, easing by 0.6% to 51.2 in April, and U.S. Institute of Supply Management's manufacturing data showed a 0.2% decline to 54.8 points.
Also, U.S. gross domestic product for the first quarter grew at 0.7%, the slowest growth rate in three years, Bureau of Economic Analysis said on Friday. The softer economic data for the world's two biggest oil consuming nations are potentially weighing on the outlook for oil demand.
Bearish technical indicators could push traders to sell, with short-term trends down. The latest trade data from the Commodity Futures Trading Commission show a net reduction in length by commodity fund traders for NYMEX WTI crude, RBOB and ULSD futures of 92,841 contracts during the week-ended April 25.
At last look, NYMEX June WTI crude futures moved 38cts lower at $48.95 bbl, holding below the psychological $50 level, and is expected to test initial support at $48 and then $47.80 and $47.01, respectively. The spot-month WTI contract lost 2.5% in April.
IntercontinentalExchange July Brent crude contract declined 45cts to $51.60 bbl after the June contract expired on Friday. The Brent crude contract lost 2.1% last month. The spot-month contract is trading at a $2.65 bbl premium to WTI, a 25cts gain versus Friday's close.
The NYMEX June RBOB futures contract fell 2.35cts at $1.5246 gallon, off a $1.5196 fresh two-month spot low, slipping below a $1.53 support point. RBOB futures lost 8.9% last month.
NYMEX June ULSD futures fell 1.79cts to $1.4893 gallon, trading near a new one-month spot low at $1.4833, with the contract seen testing support at $1.4758.
The May RBOB and ULSD products contracts expired Friday.
George Orwel can be reached at george.orwel@dtn.com
(BAS)
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