NEW YORK (DTN) -- New York Mercantile Exchange oil futures were mixed early Thursday, paring premarket losses as traders continue to adjust their views on global supply as production cuts are being considered at a summit in Vienna Thursday by the world's leading oil producers.
The market reacted negatively to reports the Organization of the Petroleum Exporting Countries have reached a consensus to extend production cuts through early next year without deepening the size of the output cuts.
OPEC sources told reporters they have tentatively agreed to extend the current 1.2 million bpd in oil production cuts through March 2018 in an attempt to rebalance the market. The current output deal that has been in place since January and due to end in June has so far failed to bring down global oil supply to their five year average.
OPEC is expected to officially announce the decision later today after its summit in Vienna. The cartel also expects their allied 11 non-OPEC producers including Russia to meet later today and agree on extending their 558,000 bpd in production cuts.
Investors, however, believe an extension of cuts will be insufficient to cut the global oil supply glut back to five-year average, said analysts.
Saudi Arabian Energy Minister Khalid al-Falih this morning ruled out deeper production cuts, saying that nine more months of cuts at the current level is enough to balance supply and demand.
"We went for a safe bet of nine months because we believe it will do the trick," said al-Falih, who proposed the nine-month extension of output cuts along with Alexander Novak, Russia's energy minister.
Analysts said the market wants to know what OPEC would do if global oil inventories fail to substantially come down after the next agreement expires in March 2018, considering the pace of production increases in the United States and Libya.
The Energy Information Administration on Wednesday 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. Domestic oil output has increased over 550,000 bpd this year so far while total crude inventories at 516.3 million bbl are 10.8 million bbl above year ago levels.
In addition, President Donald Trump this week put forward his budget proposal that would sell oil from the Strategic Petroleum Reserve. The plan would cut by half the emergency oil reserves over 10 years that totaled 687.7 million bbl as of the week-ended May 19.
At last look, NYMEX July West Texas Intermediate crude oil futures contract were 63cts lower at $50.73 bbl after reversing off a $52.00 five-week high on the spot continuation chart. July Brent crude oil futures on the IntercontinentalExchange declined 58cts to a $53.38 bbl open, having reversed off a $54.67 five-week spot high.
NYMEX June ULSD futures moved 0.55 lower at $1.6008 gallon, while June RBOB futures were 0.79cts lower at $1.6447 gallon.
George Orwel can be reached at firstname.lastname@example.org
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