Oil Futures Settle Higher Thursday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures ended higher, although came under selling pressure toward the close of trade Thursday on oversupply concerns, pressing August West Texas Intermediate crude and July ULSD futures off two and three-week spot highs, respectively, while settling higher for the sixth straight sessions. July RBOB posted its fourth consecutive higher settlement, paring end-day gains after rallying to a two-week high.

"The oil market came under pressure late in the session after equities sold off, but also from increasing production in Libya and Nigeria that have recovered faster than expected, and we see the market can't absorb the extra barrels," said Andy Lipow, president of Lipow Oil Associates in Houston.

Libyan crude supply rose to 935,000 bpd this week from 885,000 bpd last week, and intends to boost its output to a 1.0 million bpd four-year high by August. Nigeria is projected to produce 2.0 million bpd in August, the highest output since March 2013.

Aside from the faster than expected recoveries of Nigeria and Libyan supply, recent increases in U.S. production have to a large extent offset production cuts of 1.8 million bpd by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producing countries. Reports said key OPEC members are now resisting calls to deepen the production cuts.

Oil futures have since recovered a portion of last week's heavy losses that pressed the complex into a bear market. However, the six-day short-covering rally looks to be running on fumes ahead of Friday's Baker Hughes' rig count report that could show a 24th straight weekly increase in the number of active oil rigs added to the nation's oil patch.

Earlier Thursday, oil futures rallied after the U.S. Energy Information Administration on Wednesday reported U.S. crude production fell 100,000 bpd during the week-ended June 23 to 9.25 million bpd--a level not seen since the start of April, and down from a two-year high.

The market has been grasping for signs that production cuts from the OPEC, non-OPEC coalition were having an effect on inventory and in slowing the pace of U.S. output, and rallied Wednesday in response to the EIA report showing the production decline.

Analysts have also pointed to technical support this week, noting net length across the global petroleum complex was at a 16-month low, supporting this week's short-covering gains.

Thursday's trade also comes ahead of the end of June, the second quarter, and first half of 2017 on Friday, and in front of a holiday weekend, with position-squaring driving trading decisions ahead of the contract expirations for July ULSD and RBOB futures and August Brent crude futures Friday afternoon.

"There was some talk about how the [hedge] funds had a lot of cash on the sidelines that they were throwing back into the market," said David Thompson, executive vice president at Powerhouse, a brokerage firm in Washington D.C.

NYMEX August WTI crude futures settled up 19cts at $44.93 bbl, moving off a two-week spot high of $45.45. IntercontinentalExchange August Brent crude oil futures gained 11cts to $47.42 bbl, coming off a $48.03 two-week spot high. September Brent settled up 9cts at $47.63 after posting a $48.27 intraday high.

July ULSD futures gained 1.30cts with a $1.4460 gallon settlement, moving off a three-week spot high of $1.4629, and the August contract ended up 1.15cts to $1.4405 gallon. July RBOB futures settled near flat, up 0.23cts at $1.4856 gallon, off a two-week spot high of $1.5033. August RBOB futures settled 0.35cts higher at $1.4770 gallon.

George Orwel can be reached at george.orwel@dtn.com