NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower Monday afternoon amid skepticism the Organization of the Petroleum Exporting Countries will do anything to improve compliance by its members to their production cuts agreement.
"Oil producers meeting in Abu Dhabi have been slow to assure the market that compliance with the production cuts will be improved," said New York-based Citi Futures analyst Tim Evans.
A group of OPEC members and nonmembers that include Saudi Arabia and Russia are holding a technical meeting in Abu Dhabi Monday and Tuesday to discuss why some of them are failing to meet their obligations to cut production by a combined 1.8 million bpd.
The OPEC/non-OPEC production agreement has had strong compliance since its implementation in January, but members slackened in July, according to media surveys that show OPEC production rose last month to a 2017 high of 33 million bpd. The producers still have eight months to go before the agreement expires in March 2018.
"The report today by Platts that showed OPEC production rose in July got the market selling off, but in truth Platts only reiterated earlier surveys by Bloomberg and Reuters," said analyst Phil Flynn at Price Futures in Chicago.
The OPEC output is higher due to increasing production in Libya, Iraq and Nigeria. Libya's 270,000 bpd Sharara oilfield restored services on Monday after a few hours of interruption caused by armed protestors late Sunday, the National Oil Corp. said. Libyan total production now tops 1.0 million bpd, a four-year high, having risen in the past six months as idled oil fields were bring back online. Libya remains exempt from the OPEC production cuts.
Nigerian production of crude oil and condensates rose 10,000 bpd month-on-month to 2.06 million bpd in July, the country's oil ministry said on Monday. Africa's largest oil producer continues to ramp up output despite sabotage attacks by local militants in the Niger Delta region.
Nigerian production of crude oil was pegged in June at 1.73 million bpd by secondary sources while Nigeria told OPEC that it produced 1.66 million bpd in June. Two weeks ago, Nigeria promised to cap its output at 1.8 million bpd.
Iraq is also one of the OPEC members that raised production recently, said Michael Cohen, head of commodities research at Barclays Capital.
"Iraq argues that despite its higher production its exports are down and in compliance with the production agreement, but the problem is the agreement was based on production not exports," said Cohen.
However, a survey by Platts today showed Iraq's production fell 150,000 bpd month-over-month to 4.4 million bpd average in July.
The downside for oil futures have been limited by continued stock draws in the United States. Domestic crude oil inventories were drawn down to a 481.9 million bbl seven-month low in the week-ended July 28 despite production rising to a fresh two-year high of 9.43 million bpd.
For the week-ended Aug. 4, an early DTN survey shows analysts expecting stock draws of 2.75 million bpd for crude oil and 1.0 million bbl each for gasoline and distillate supply.
On Tuesday, EIA will issue its Short Term Energy Outlook while OPEC's Monthly Oil Market Report is due Thursday, and the International Energy Agency's Oil Market Report is set for release on Friday.
September West Texas Intermediate crude futures settled 19cts lower $49.39 bbl while October Brent on the IntercontinentalExchange eased 5cts to $52.37 bbl settlement.
NYMEX September ULSD futures settled 0.88cts lower at $1.6398 gallon while September RBOB futures declined 1.64cts to $1.6299 gallon at settlement.
Commitment of Traders' Report for the week-ended Aug. 1 by Commodity Futures Trading Commission shows money managers added length in NYMEX West Texas Intermediate crude, RBOB, and ULSD futures.
George Orwel can be reached at email@example.com
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