NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures took a leg lower Wednesday morning, retreating from four-week highs as expectations weekly U.S. petroleum supplies were drawn down were countered by reports crude oil production by the Organization of the Petroleum Exporting Countries rose in June. A stronger U.S. dollar and reports Russia is objecting to deepening OPEC-led production cuts beyond 1.8 million bpd were also keeping the futures complex under pressure.
Volume is expected to be thin today following U.S. Independence Day holiday said analysts.
OPEC production rose 280,000 bpd to 32.72 million bpd in June, according to a Reuters' survey early this week.
The producer group agreed last year to cut their oil output by 1.2 million bpd alongside 558,000 bpd in output cuts by 10 non-OPEC producers including Russia. The 15-month pact that started in January will expire in March 2018.
As oil prices fell in mid-June, some OPEC members suggested deepening the output cuts in order to prop up prices. However, Russia this morning said they are opposed to any proposal to deepen the production cuts. Instead, Russia wants to stick with the ongoing OPEC and non-OPEC production pact, according to a Bloomberg report.
Analysts said it could take much longer than previously expected to rebalance the global market, with Libyan production rising to over 1.0 million bpd this week while Nigerian production is expected to hit 2.5 million bpd in August. Libya and Nigeria are exempt from the OPEC cuts.
Domestically, oil production dropped to an 11-week low of 9.25 million bpd during the week-ended June 23, according to the latest data from the U.S. Energy Information Administration. The data shows U.S. output 630,000 bpd above a year ago, and 1.21 million bpd higher than the five-year average.
The market anticipates another decline in domestic production while expecting crude inventories to have been drawn down by 2.3 million bbl during the last week of June. Gasoline and distillate stocks are expected to have declined by 1.7 million bbl and 500,000 bbl, respectively.
The American Petroleum Institute will issue its report at 4:30 PM ET while the EIA will release its data at 11:00 AM ET Thursday. The data was delayed by a day due to the July 4 U.S. Independence Day holiday.
In early trade, NYMEX August West Texas Intermediate crude futures slipped 52cts to $46.55 bbl, reversing off a one-month high of $47.32 on the spot continuation chart.
IntercontinentalExchange September Brent crude futures fell 38cts to $49.23 bbl, with Brent's premium to WTI widening slightly to $2.68 bbl.
In products trade, August ULSD futures were fractionally down at $1.5125 gallon, off a $1.5248 fresh one-month spot high. August RBOB futures slid from a $1.5409 fresh one-month spot high to $1.5277 gallon.
The contracts have all accelerated to the downside at last look.
In currency trade, the U.S. dollar index edged up before the release of minutes of last month's meeting by the Federal Open Market Committee. The market is looking for clues to the Fed's interest rate policy.
George Orwel can be reached at firstname.lastname@example.org
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