NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled a tad higher across the board Monday afternoon amid follow-through short-covering from Friday after the oil complex tumbled to a bear market early last week on concerns about lingering global supply glut.
Last week's selloff was overdone and U.S. oil stock draws are starting to whittle down excess domestic supply, with summer demand expected to continue improving, said analysts.
"Crude inventories are now being drawn down and the OPEC strategy of cutting production is working," said Michael Cohen, head of energy markets research at Barclays Capital in New York. "Investors are short positioning WTI but we expect prices to go higher during the third quarter."
Oil futures were also supported a stronger natural gas market due to forecast for warmer weather over the next 10 days, which boosted cooling demand, said analyst Phil Flynn at Price Futures in Chicago.
Moreover, concerns offshore U.S. oil production will be interrupted by shut-ins caused by Tropical Storm Cindy added to the upside for the West Texas Intermediate crude. The impact from the storm should also lead to sizable draws in supply.
On weekly inventories, an early survey of analysts shows U.S. crude oil supply is expected to have declined by 3.3 million bbl during the week-ended June 23, while gasoline stockpiles are seen down 700,000 bbl and distillate supply is seen unchanged.
The American Petroleum Institute will issue its weekly oil data late Tuesday while the Energy Information Administration's data is set for released on Wednesday midmorning.
The incessant growth in U.S. oil production and the prospect of higher oil production by Libya and Nigeria have undermined production cuts of 1.8 million bpd by the Organization of Petroleum Exporting Countries and their 10 non-OPEC producer allies.
Domestic crude production is expected to have surged to a 9.35 million bpd fresh two-year high after Baker Hughes, Inc. reported the number of active oil rigs increased for the 23rd straight week, up last week by 11 to a 26-month high of 758.
NYMEX August WTI crude futures settled 37cts higher at $43.38 bbl, off a $43.65 three-day spot high, with the contango stretching into 2018 and beyond, suggesting investors are not convinced OPEC will manage to reduce global inventories to their five-year average any time soon.
August Brent crude futures on the IntercontinentalExchange settled up 29cts at $45.83 bbl, off a $46.24 three-day spot high. In arbitrage trade, the Brent crude premium to WTI eased 8cts to $2.45 bbl.
NYMEX July ULSD futures edged up 0.85cts to $1.3802 gallon, moving off a three-day spot high of $1.3901, while July RBOB futures were 0.46cts higher at $1.4387 gallon settlement, off a four-day high of $1.4480. The RBOB contract remains in modest backwardation.
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