Oil Futures End Tuesday Mostly Up

Oil Futures End Tuesday Mostly Up

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mostly higher Tuesday afternoon as data showed oil production from the Organization of the Petroleum Exporting Countries declined in August and demand remains relatively strong, while Hurricane Irma's impact to gasoline demand in the Southeast less than initially feared.

"The lowering of production and revising up demand by the OPEC report supported the crude market," said analyst Phil Flynn at Price Futures. "Even more important, OPEC production fell, which could help rebalance the market."

In its September Monthly Oil Market Report released this morning, OPEC revised up estimated global annual oil demand growth by 50,000 bpd to 1.42 million bpd for 2017 while raising the annual demand growth rate for 2018 by 70,000 bpd to 1.35 million bpd.

The report left unchanged non-OPEC production estimate for 2017, while revising lower 2018 supply estimates by 100,000 bpd versus estimates published a month ago.

Citing secondary sources, MOMR said OPEC crude production declined in August by 79,000 bpd to 32.76 million bpd. This latest data is bullish because it contrasts with prior data that showed OPEC produced more oil in June and July.

The decline in OPEC production follows discussions this weekend by energy ministers from Saudi Arabia, Venezuela and Kazakhstan to prolong the agreement by OPEC and 10 non-OPEC producers to cut output by 1.8 million bpd beyond March 2018 to June 2018.

OPEC, in their monthly report, said world oil supply was drawn down 410,000 bpd in August from July to 96.75 million bpd. A separate monthly report by the Energy Information Administration was offset by the OPEC report, Flynn added. EIA's Short-term Energy Outlook for September revised down estimated global oil demand for 2017 and 2018 while showing August crude oil production by the United States declined. While global demand was revised down, demand by developed countries that are members of the Organization for Economic Cooperation and Development was revised up by 110,000 bpd for 2017 and 170,000 bpd for 2018, STEO shows.

EIA forecasts total U.S. crude oil production to average 9.3 million bpd for 2017 and 9.8 million bpd in 2018. However, domestic crude production is estimated to have averaged 9.2 million bpd in August, down about 40,000 bpd from the July average. Looking ahead, weekly U.S. oil supply data are due out this afternoon and Wednesday morning. A new survey shows analysts expect total crude stockpiles for the week-ended Sept. 8 to show a build of 5.5 million bbl while gasoline and middle distillates are each seen drawn down by 3.0 million bbl.

NYMEX October West Texas Intermediate crude oil settled up 16cts at $48.23 bbl while November Brent crude on the IntercontinentalExchange gained 43cts to $54.27 bbl, settling at a $6.04 bbl premium to WTI.

NYMEX October ULSD futures were little changed, settling 0.21cts lower at $1.7406 gallon. October RBOB futures settled up 2.18cts at $1.6563 gallon. The October RBOB contract settled at a 5.6cts premium to the November contract, reflecting heightened short-term demand.

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