NEW YORK (DTN) -- New York Mercantile Exchange spot-month West Texas Intermediate crude oil futures angled slightly higher at the start of regular trade Monday morning on follow-through rally from last week as traders move to cover short positions.
Analysts said the recent selloff was overdone and weekly U.S. oil stock draws are starting to whittle down excess domestic supply, with summer demand expected to continue improving. Technical support for WTI, RBOB and ULSD is also aiding the recovery from a bear market seen last week.
Bargain hunters are now piling on to the buy side, although the latest commitment of traders' data by the Commodity Futures Trading Commission showed money managers cut their net bullish positions on West Texas Intermediate crude to a 10-month low. This comes after WTI posted a 10-month low last week.
In addition, oil futures are supported overnight by concerns offshore U.S. oil production will be interrupted by shut-ins caused by Tropical Storm Cindy, said analyst Phil Flynn at Price Futures Group in Chicago. The impact from the storm should also lead to sizable draws in supply.
Flynn is projecting a 4.5 million bbl decline in U.S. crude oil supply and a 1.0 million bbl drop in Cushing, Oklahoma, delivery point for WTI for the week-ended June 23.
Gasoline stockpiles are expected to have fallen during the week-ended June 23 by 3.0 million bbl and middle distillates supply is seen down by 2.0 million bbl, Flynn added. Crude production is expected to have surged again to a fresh two-year high after Baker Hughes, Inc. reported the number of rigs added to the oil patch rose for the 23rd straight week, up last week by 11 to a 26-month high of 758.
Still, relentless increases in U.S. oil production and the prospect of higher oil supply in Libya and Nigeria have had a negative impact on production cuts of an estimated 1.8 million bpd by the Organization of Petroleum Exporting Countries and their 10 non-OPEC producer allies. OPEC members are considering a plan to deepen those cuts, which are set to expire in March 2018.
At last look, NYMEX August WTI crude futures gained 12cts to $43.13 bbl, off a $43.65 three-day spot high. August Brent crude futures on the IntercontinentalExchange edged up 6cts to $45.60 bbl, off a $46.24 three-day spot high.
In arbitrage trade, the Brent crude premium to WTI eased 6cts to $2.47 bbl. WTI's forward curve remains in a bearish contango price structure.
NYMEX July ULSD futures edged up 0.63cts to $1.3780 gallon, near a three-day spot high of $1.3901. July RBOB futures eased 0.42cts to $1.4299 gallon at last look, after trading to a four-day high of $1.4480. The RBOB contract is in backwardation.
George Orwel can be reached at email@example.com
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