Oil Futures Settle Down Friday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower on Friday afternoon, but off lows on overbought market conditions, and after a survey by oil tanker-tracker Petro-Logistics showed oil output by the Organization of Petroleum Exporting Countries is poised to climb by 145,000 bpd this month.

The market trimmed losses this afternoon after oil services firm Baker Hughes, Inc. released a report showing U.S. oil rig-count fell by one to 764 this week, but they remain 393 higher than a year ago. So far this year, oil drillers have placed 239 rigs into service.

"The market was overbought, but also the Petro-Logistics report was the trigger for the selloff today," said analyst Phil Flynn. "People are nervous because OPEC compliance is down. That's what broke the camel's back."

The Petro-Logistics survey was first reported by Reuters, exacerbating concerns over global oversupply. It would the second straight monthly increase in OPEC production and suggests several members of the cartel are not sticking to their pledges to cut production until March 2018.

OPEC and non-OPEC agreed to a 15-month output cuts totaling 1.8 million bpd. From January to March, compliance was very strong. However, OPEC compliance slumped to 78% in June, down from 95% for May, amid higher output from several of its members, the International Energy Agency said last week.

A joint OPEC and non-OPEC compliance monitoring committee will meet in Russia July 24 to review compliance record and discuss adding Libya and Nigeria to their supply agreement.

The OPEC production cuts have also been countered by the relentless increase in U.S. output.

Domestic production is up 5.4% this year and has increased for the past three straight weeks to a 9.429 million bpd fresh two-year high as of the week-ended July 14, according to EIA data.

At settlement, September West Texas Intermediate crude oil futures contract fell $1.15 to $45.77 bbl, off a one-week low of $45.54. September Brent crude futures on ICE settled $1.24 lower at $48.06 bbl, off a one-week low of $47.81.

The August ULSD futures contract dropped 2.84cts to $1.5152 gallon, off a two-day low of $1.5090, and the August RBOB futures contract slumped 4.29cts to $1.5633 gallon, off a three-day low of $1.5563.

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