Oil Futures Stabilize on OPEC Talk

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved slightly higher Friday morning in a fragile attempt at recovery after Thursday's rout. A fresh focus is now on an afternoon report on this week's oil rig count.

The advance in oil futures prices followed a payroll report from the Bureau of Labor Statistics that topped expectations, and bullish comments by a Saudi Arabian oil official on potential extension of oil production cuts by members of the Organization of Petroleum Exporting Counties intended to rebalance global oil supply and demand.

According the BLS, 211,000 jobs were added last month while the unemployment rate fell to 4.4%, suggesting a strong U.S. economy that could boost demand as we head to the summer's peak driving season. The payroll data buoyed investor confidence and prompted risk-off trade.

OPEC members and 11 nonmember countries are building a consensus to extend the 1.8 million bpd output cut program beyond the June 30 deadline to clear the global supply glut, said Adeeb al-Aama, Saudi Arabia's OPEC governor.

Saudi Arabian and Russian energy ministers on Thursday discussed the gradual pace of global stock drawdown and agreed to continue working with other producers towards rebalancing supply with demand, said al-Aama, adding that Russia may support prolonging production cuts for another six months.

The OPEC-led production cuts have barely made a dent on global supply because of rising U.S. production and the recovery in production from Libya and Nigeria, analysts said. U.S oil production at 9.293 million bpd during the week ended April 28 is 1.3 million bpd above the five-year average, and they have been on the increase since mid-August 2016, according to Energy Information Administration data.

Baker Hughes, Inc. will release its oil rig-count report for the week ending today at 1:00 p.m. EDT, and indications are it will show a 16th consecutive week-over-week increase in the count.

This morning, Baker Hughes reported the average United States oil rig count for April was 853, up 64 versus March and 416 higher than the same month in 2016.

Elsewhere, Libyan output has reportedly rebounded to a new high level in recent days. The OPEC member reported on Monday that production has climbed to a 760,000 bpd, three-year high after two major oilfields restarted. Libya intends to increase its production to 1.1 million bpd by August.

Analysts said for every barrel OPEC takes out of the market, another is added by the U.S., Libya and Nigeria, and the longer OPEC takes to rebalance the market the more likely speculative traders will move to reduce length in oil futures.

At last glance, NYMEX June WTI futures were up 2cts at $45.54 bbl after reversing off a $43.76, 5-1/2-month low on the spot continuation chart, with support placed at $40.65. ICE July Brent crude oil futures were up 16cts at $48.54 bbl, reversing off a $46.64 fresh five-month spot low, and support is at $42.73.

NYMEX June ULSD futures gained 1.04cts to $1.4227 gallon, recouping a portion of Thursday's losses and reversing off a near a better than 5-month spot low of $1.3748. June RBOB futures edged 0.90cts higher to $1.4902 gallon, having reversed off a $1.45, 5-1/2-month spot low.

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