NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures ended sharply lower Wednesday.
Oil futures reversed from one-month highs on profit taking that accelerated into a broader selloff amid technical pressure and reports production by the Organization of the Petroleum Exporting Countries, or OPEC, rose in June. In addition, Russia rejected deepening ongoing production cuts by an OPEC-led coalition.
"The idea that the market is under pressure today because Russia is against deepening the production cuts is only partly true, or at least it reflects a market that psychologically remains bearish despite recent run-up in prices," said Tom Bentz, vice president at ABN AMRO.
Russia and nine non-OPEC oil producing countries joined OPEC in agreeing to reduce their production by nearly 1.8 million barrels per day through March 2018. The agreement took effect Jan. 1.
"Russian comments seeming to rule out further production cuts for now may be weighing on market sentiment as well, although we would see this as downgrading the potential for a bullish surprise rather than a change to the base case scenario," said Tim Evans, an energy specialist with Citi Futures.
The sell-off also followed surveys from Reuters and Bloomberg this week that found OPEC production rose in June despite the production agreement, with the increase because of production gains from Libya and Nigeria that are exempt from the agreement. Reuters reported OPEC production increased 280,000 bpd to 32.72 million bpd in June, while Bloomberg reported a 260,000 bpd increase.
The selloff, which coincided with a stronger dollar, pressured West Texas Intermediate and ULSD futures to their first lower settlement in nine sessions, while the RBOB contract had settled higher in the seven prior sessions.
The three NYMEX oil futures contracts all registered outside down days Wednesday. Evans described the price action as "a correction of the correction," noting that the selling pressure came after oil futures "completed a near 50% upward retracement of the May-June decline on Monday."
NYMEX August WTI crude futures settled $1.94 lower at $45.13 per barrel, reversing off a $47.32 one-month high on the spot continuation chart. Intercontinental Exchange September Brent crude futures fell $1.82 to a $47.79 bbl settlement. August ULSD futures dropped 3.43 cents to a $1.4785 gallon settlement, reversing off a $1.5248 one-month spot high.
August RBOB futures tumbled 3.24 cents to a $1.5024 settlement after trading at a $1.5409 one-month spot high.
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