NEW YORK (DTN) -- New York Mercantile Exchange oil futures were lower on Monday morning amid profit-taking ahead of a technical meeting later today by the Organization of Petroleum Exporting Countries and non-OPEC Russia to discuss compliance with their 1.8 in production cuts.
The meeting in Vienna at a crucial time as a raft of recent data showed some of the world's leading oil producers pumped above their individual production quotas last month. The International Energy Agency earlier this month showed OPEC compliance rate at 75%, down from 77% for June and the lowest so far this year, with the decline lowering year-to-date compliance to 87%.
Libya's National Oil Corp. on Sunday declared a force majeure on its loadings of Sharara crude from the Zawiya oil terminal. The move came after the shutdown on Saturday of 270,000 barrels per day (bpd) Sharara oilfield. The shutdown could slow the recovery of Libya's oil industry, which has been hurt by years of civil strife.
Libya's increasing production this year prompted concerns the OPEC-led production cuts nay not succeed in rebalancing the market by early next year.
However, while global supply continues to run ahead of demand, the U.S. oil market has shown signs of tightening.
The Energy Information Administration has shown U.S. commercial crude stocks consistently posting steep draws over the past two months, down 8.9 million barrels (bbl) to a 466.5 million bbl 19-month low in the week-ended Aug. 11, and down 69 million bbl or nearly 13% from the 535.5 million bbl peak seen at the end of March. Crude stocks have narrowed their five-year surplus to 82 million bbl.
For the week-ended Aug. 18, Baker Hughes, Inc. reported the number of rigs drilling for oil in the United States fell by five to a 763 six-week low, the largest decline in rig count since mid-January and the fourth weekly decline in the past eight weeks.
Meantime, with two weeks left before the end of the summer peak driving season, demand for gasoline is expected to decline in September after the Labor Day holiday. EIA data for the week-ended Aug. 11 showed that refined product inventories edged up as output remained robust as well and total demand fell but remained solid at nearly 21 million bpd.
Commodity fund traders remained net sellers of NYMEX oil futures during the week ended Aug. 15, cutting bullish bets by a net 15,670 contracts, Commodity Futures Trading Commission's Commitments of Traders report shows.
At 9 a.m. EDT, September WTI crude futures fell 27 cents to $48.24 bbl, trading at a 15 cents discount to the October contract ahead of its own expiration on Tuesday. The October WTI contract was down 27 cents to $48.39 bbl and technical support remains at recent $46.24.
October Brent crude on the IntercontinentalExchange declined 46 cents to $51.92 bbl, trading at a $4.02 premium to WTI, near a 21-month high posted on Friday. The open arbitrage is expected to support export of U.S. crude. Brent crude remains in a bullish backwardation oil price structure, with the October contract trading at a 34 cents premium to the November contract.
September ULSD futures dropped 2.61 cents to $1.5943 gallon, and September RBOB futures contract tumbled 2.81 cents to $1.5959 gallon.
The RBOB market is seasonally backwardated, with the September contract trading at an 8.85 cents premium to the October contract.
George Orwel can be reached at email@example.com
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