Oil Settle Lower Monday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled down on Monday with West Texas Intermediate crude posting the lowest settlement in nearly five weeks, as weak economic data prompted fresh questions about demand while supply continues to increase in the United States and overseas.

"The mantra today was all about higher production in Libya and weaker gasoline demand, but volume was light because of the May Day holiday (outside of the U.S.) and the weak manufacturing data from China played into the at low demand story," said analyst Phil Flynn at Price Futures Group.

With last week's restart of the Sharara oilfield and production ramping up from El Feel field, Libya's total production is above 760,000 bpd, the highest level since December 2014, according to the country's state owned oil company.

A sustained recovery in Libyan oil output as well as rising U.S. production would limit the impact of production cuts by the Organization of the Petroleum Exporting Countries and 11 non-OPEC producers which, in turn, slows the pace of rebalancing the global oil market.

OPEC and 11 non-OPEC producers will meet May 25 to discuss extending their agreement to cut output by nearly 1.8 million bpd for another six months after the current quota scheme expires on June 30. OPEC said last week that the rate of compliance with the agreement reached 98% in March for both OPEC and non-OPEC.

Domestically, the Energy Information Administration's Petroleum Supply Monthly, which was issued Friday (4/28), showed that U.S. crude output grew 190,000 bpd month-on-month to 9.03 million bpd in February, driven by a surge in Lower 48 onshore output.

Monthly PSM data were roughly in line with the weekly EIA production data in February, and the latter indicate production grew an additional 210,000 bpd through late April.

Demand declined by a significant 490,000 bpd year-on-year, marking the largest decline since 2012. Consumption was weaker across much of the barrel, but gasoline and unfinished oils were exceptionally weak.

Also on Friday, oil services firm Baker Hughes, Inc. showed 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.

For the week-ended April 21, EIA's Weekly Petroleum Status Report showed oil production rose 66,000 bpd during the first three weeks of April to 9.265 million bpd. EIA also 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 oil futures complex came under additional downward pressure after a survey Sunday that showed 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.

These were accompanied by data showing personal income fell in March and U.S. gross domestic product grew at the slowest rate in three years during the first quarter. The softer economic data for the world's two biggest oil consuming nations tampered oil demand expectations.

NYMEX June WTI crude futures settled 49cts lower at $48.95 bbl, and is expected to test initial support at $48 after the spot-month traded last Thursday to a $48.20 one-month low.

IntercontinentalExchange July Brent crude contract declined 53cts to $51.52 bbl at settlement. The spot-month Brent contract posted a $2.68 bbl premium to WTI at the close, a 28cts gain versus Friday's close.

The NYMEX June RBOB futures contract tumbled 2.09cts to $1.5272 gallon at settlement, off a $1.5142 fresh two-month spot low after slipping below a $1.53 support point. The NYMEX June ULSD futures contract declined 1.94cts to $1.4878 gallon at settlement, off a new one-month spot low at $1.4766, testing support at $1.4758.

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