NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled slightly lower Wednesday after seesawing on either side of unchanged during most of the session, pulling back amid profit-taking ahead of a crucial meeting of the world's leading oil producers Thursday to discuss an extension of production cuts through early next year.
The Organization of the Petroleum Exporting Countries and their allied 11 non-OPEC producers will meet in Vienna to consider a proposal put forward by Saudi Arabia and Russia to extend output cuts of 1.8 million barrels per day (bpd) for nine months after the June 30 expiration of the current quota scheme.
The proposed nine-month extension doesn't have the support of all 24 countries, with OPEC member Iran and non-OPEC member Kazakhstan holdouts. It is also not clear if the proposal would substantially bring down global oil supplies in the face of constant increases in output by U.S. oil shale producers, as well as higher production in Canada. Additionally, President Donald Trump this week put forward his budget proposal that would sell oil from the Strategic Petroleum Reserve, with the plan to half the reserves over 10 years that totaled 687.7 million barrels (bbl) on May 19.
The Energy Information Administration today reported U.S. crude oil production rose by 15,000 bpd to 9.32 million bpd during the week-ended May 19, while up 553,000 bpd from a year ago.
Aside from the increase in the production rate the EIA report was bullish for crude oil and mixed for products.
The EIA report showed domestic crude stocks plunged 4.4 million bbl to 516.3 million bbl last week, trimming a year-over-year surplus to 10.8 million bbl or 2.1% lower than a year ago.
On products, the report showed gasoline supplies down 787,000 bbl and that distillate fuel supplies fell nearly 485,000 bbl. Implied demand was up 252,000 bpd for gasoline and 144,000 bpd for distillates, with refinery crude inputs up 159,000 bpd.
NYMEX July West Texas Intermediate crude oil futures contract settled 11cts lower at $51.36 bbl, reversing off a $51.88 near five-week high on the spot continuation chart. This is the first in six sessions WTI has settled in negative territory. Along the forward curve, WTI futures moves into a backwardation market structure in the first quarter of 2018.
July Brent futures on the IntercontinentalExchange settled 19 cents lower at a $53.96 bbl, reversing off a $54.62 five-week spot high, with Brent trading at a $2.60 bbl premium to WTI, down 8 cents.
Oil products settled nearly flat, with NYMEX June ULSD futures fractionally lower at $1.6063 gallon, reversing off a $1.6221 five-week spot high. June RBOB futures were 0.88 cent lower at $1.6526 gallon, reversing off a fresh four-week spot high at $1.6750. The backwardation for RBOB futures remains modest, with the June contract trading at a 0.5 cent premium to the July contract.
George Orwel can be reached at email@example.com
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