NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures reversed lower Tuesday morning on the back of a stronger U.S. dollar, growing concerns over soft demand and fresh doubts the Organization of the Petroleum Exporting Countries and their non-OPEC allies would expedite the rebalancing of the global oil market.
The futures complex rallied Monday through overnight trade after Saudi Arabia and Russia on Monday said they were considering extending their 1.8 million bpd in production cuts into 2018 while some other producers reportedly talked of deeper cuts to expedite the drawdown of an ongoing oil supply overhang.
Russian oil minister Alexander Novak said he was discussing a number of scenarios with Saudi Arabia and other producers, and he believes that extending the production cuts would help speed up the drawdown of excess global supply.
The move by the Russians and Saudis to reaffirm their commitment to a balanced market was short-lived, however. The market is having a hard time believing these producers would be successful in quickly drawing down global inventory despite their efforts to jawbone prices because for every barrel they have taken out of the market 0.8 points of barrel have been added by U.S. oil shale producers over the past two months, said analysts.
"There's worry in the market because while the Saudis and Russians are committed to cutting production, which should give oil prices support, but a lot of what happens to oil prices will depend on U.S. data," said analyst Phil Flynn at Price Futures Group.
The market is bracing for a raft of supply and demand data this week, with the Energy Information Administration set to release its Short-term Energy Outlook for May near midday. Later this the afternoon, a weekly oil report will be issued by the American Petroleum Institute, followed by the EIA's Weekly Petroleum Status Report on Wednesday.
A survey shows the market expects U.S. stock draws of 2.1 million bbl in domestic crude oil supplies, 1.1 million bbl in gasoline stocks and 800,000 bbl in distillate inventories for the week-ended May 5.
In early trade, the NYMEX June WTI futures contract were 19cts lower at $46.24 bbl while IntercontinentalExchange July Brent crude oil futures eased 21cts to $49.13 bbl, with both spot crude contracts trading above their support levels.
The NYMEX June ULSD futures contract slipped 0.29cts to $1.4527 gallon, off a $1.4672 three-day high. The June RBOB futures contract eased 0.64cts to $1.5114 gallon, off a $1.5296 three-day high.
George Orwel can be reached at firstname.lastname@example.org
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