NEW YORK (DTN) -- New York Mercantile Exchange oil futures retreated Tuesday morning amid doubt the production agreement reached last week by the Organization of the Petroleum Exporting Countries and several non-OPEC producers would succeed in rebalancing the global oil market by year's end as intended.
Fourteen OPEC and 10 non-OPEC producing countries agreed on Thursday to extend production cuts of nearly 1.8 million bpd by nine months through March 2018 without increasing the size of the output cuts. The cuts, in place since Jan. 1, were initially scheduled to expire on June 30.
In the days before Thursday's decision, key OPEC ministers including Saudi Arabian Energy Minister Khalid al-Falih talked of deepening the cuts by seeking the support of Egypt and Turkmenistan. However, they failed to get those two non-OPEC nations to join other non-OPEC producers in reducing output. Al-Falih later suggested Egypt and Turkmenistan could join the agreement on Nov. 30, when OPEC is scheduled to meet again to review whether or not this agreement is successful.
OPEC-led production cuts have so far not been able to substantially cut a global oil surplus partly due to growing production in the United States, Canada, Indonesia, Libya and Nigeria.
In the United States, data from the Energy Information Administration last week showed crude production at a 20-month high of 9.32 million bpd during the week-ended May 19, despite total crude stockpiles falling 4.4 million bbl to 516.3 million bbl.
Domestic production appears to have increased again last week, with oil services firm Baker Hughes, Inc. reporting that two more rigs were deployed in the nation's oil patch during the week-ended May 26. The rig count has increased for 19 consecutive weeks to a total of 722, the highest in more than two years.
The International Energy Agency recently projected in its Oil Market Report that U.S. production would end 2017 790,000 bpd higher than a year earlier. OPEC also said in its recent Monthly Oil Market Report that Nigerian oil production rose by 50,800 bpd to 1.5 million bpd in April, based on secondary sources.
Analysts said speculative traders would dump long positions acquired in recent months if it takes longer to rebalance the market than previously estimated.
At last look, NYMEX July West Texas Intermediate crude futures were down 51cts at $49.29 bbl while July Brent crude oil futures on the IntercontinentalExchange tumbled 92cts to $51.37 bbl. Technical support levels are set at $47.88 for WTI futures and at $49.71 for the Brent contract.
NYMEX June ULSD futures declined 2.37cts to $1.5396 gallon while June RBOB futures shed 1.65cts to $1.6261 gallon ahead of their expirations at the close of trade Wednesday.
George Orwel can be reached at email@example.com
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