Oil Futures End Lower Thursday

Oil Futures End Lower Thursday

NEW YORK (DTN) -- After a volatile trade session, New York Mercantile Exchange spot-month oil futures settled lower Thursday afternoon as the complex came under selling pressure amid overbought market conditions, with concerns over higher production by the Organization of Petroleum Exporting Countries also weighing on the market.

"Everyone is talking about higher OPEC production, but what they forget is that oil started falling when the stock market sold off," said Chicago-based analyst Phil Flynn at Price Futures. "So I think the stock market selloff caused panic among hedge funds who had come in heavily long on both equities and oil, and so they decided to take profits."

Earlier, the oil futures complex rallied after OPEC issued its monthly report this morning raising its global oil demand outlook for 2017 and 2018.

OPEC's Monthly Oil Market Report for August estimated global oil demand growing by 1.37 million barrels per day (bpd) to an average of 96.49 million bpd in 2017, revised higher by 100,000 bpd as improvement in economic conditions in Europe, the United States and China boosted consumption of industrial and transportation fuels.

On supply, the report estimated non-OPEC oil output in 2017 growing at a 780,000 bpd rate to a total supply of 57.77 million bpd, revised down by 28,000 bpd from July estimates due to lower output in the U.S. and Canada. Non-OPEC oil supply in 2018 is seen growing at 1.10 million bpd rate 58.87 million bpd.

However, a bearish part of the OPEC report that showed an increase in July output spooked the market because it confirmed three recent media surveys showing OPEC members no longer complying with their production quota limits.

Citing secondary data, the oil cartel's MOMR showed OPEC production rose by 173,000 bpd to average 32.87 million bpd in July, largely due to increases in output in Libya, Nigeria, and Saudi Arabia. The OPEC report said the Saudis produced 10.067 million bpd in July, up 31,800 bpd from June. Libyan production rose 154,300 bpd in July to 1.001 million bpd. Nigeria produced 1.748 million bpd in July, up 34,300 bpd from June output.

"The market remains skeptical about OPEC when they see an increase in production by OPEC members led by Libya," said Houston-based analyst Andy Lipow of Lipow Associates. "They are ignoring demand increase."

September West Texas Intermediate crude futures settled 97 cents lower at $48.59 per barrel (bbl) after trading within a moderate range between an eight-day high of $50.22 and an eight-day low of $48.42. The WTI contract tested resistance at the recent high of $50.43, but failed to hold above the psychological $50 mark.

October Brent futures on the IntercontinentalExchange dropped 80cts to a $51.90 bbl settlement, reversing off a 2-1/2-month high of $53.64 and broke above resistance.

September ULSD futures settled down 2.20 cents at $1.6313 gallon after testing resistance at $1.6765 and reversing off a 5 1/2-month spot high of $1.6797. The September RBOB futures contract settled 1.71 cents lower at $1.6028 gallon, reversing off three-day spot high of $1.6494 and tested resistance between $1.6393 and $1.6664.

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