Oil Futures Settle Higher
NEW YORK (DTN) -- New York Mercantile Exchange June oil futures ended in positive territory Friday with West Texas Intermediate crude oil and ULSD contracts settling within a hair of Thursday's settlements while RBOB eked a moderate gain on the day. However, these are the first weekly gains in about a month for all the three spot-month oil futures contracts.
Oil futures rallied Wednesday and Thursday and consolidated the gains during most of Friday's session amid hope the oil market would tighten in the coming weeks should U.S. crude oil stocks continue to be drawn down with improving fuel demand.
In addition, the market now considers it almost a forgone conclusion that the Organization of the Petroleum Exporting Countries and 11 non-OPEC producers would rollover their 1.8 million bpd in ongoing production cuts for six more months or more, and may even agree to deepen output cuts.
The 13-member cartel is set to meet on May 25 to make those decisions, with most of the members including Saudi Arabia, Iraq and Iran supporting the plan to extend cuts.
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The Wall Street Journal reported some OPEC members were mulling the idea of bringing more non-OPEC producers into the agreement. There are currently 11 non-OPEC producers fronted by Russia, which is currently the world's top oil producer. Of the 558,000 bpd non-OPEC agreed to cuts, Russia is responsible for 300,000 bpd. Moscow this week said it supports OPEC's plan to rollover the production cuts.
Analysts said an extension of the OPEC agreement through 2018 would help accomplish the goal of reducing the global oil surplus much faster, and so deepening the cuts and extending them through next year would be extremely bullish.
"There's some confidence in the market OPEC is going to extend the production cuts," said analyst Phil Flynn at Price Futures Group. "We see the market is starting to tighten."
Friday's upside for oil futures were curbed, however, after oil services firm Baker Hughes, Inc. said domestic producers added more rigs to the nation's oil patch this week. The Baker Hughes report for the week ended May 12 showed the oil rig count in the United States rose by nine to 712, marking the 17th consecutive week in which rigs were added to the oil patch.
Since the start of the year, the industry has added 187 oil rigs and some 238 since the Nov. 30, 2016 when OPEC announced it would cut 1.2 million bpd of its output. At 712, the oil rig count is at the highest point since April 17, 2015, and up 394 from the comparable week a year ago.
The rig count indicates the direction of U.S. oil production and EIA weekly data issued this week showed production at a 9.314 million bpd 20-month high during the week-ended May 5.
NYMEX June WTI crude futures settled a penny higher at $47.84 bbl, up $1.62 or 3.5% on the week. July Brent crude futures on the IntercontinentalExchange added 7cts to $50.84 bbl at settlement, posting a $1.74 or 3.5% weekly gain and widening the premium to WTI by 6cts to $3.00 bbl at the close, the biggest premium in five weeks.
NYMEX June ULSD futures eked a 0.34cts gain to settle at $1.4933 gallon, off a $1.5056 1-1/2 week high and gaining 5.67cts or 3.9% on the week. June RBOB futures rose 1.39cts to $1.5761 gallon settlement, off a better than two-week spot high of $1.5839 and up 7.15cts or 4.75% for the week. The June RBOB contract traded at a 0.20cts premium to July contract, an early sign of improving demand.
George Orwel can be reached at George.orwel@dtn.com
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