Oil Futures End Lower on Monday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled sharply lower Monday afternoon amid selling pressure from a stronger U.S. dollar and reports that the Organization of the Petroleum Exporting Countries pumped more crude oil in September than previously thought.

"Everybody is pointing to the strong dollar and the OPEC reports [for the oil price decline] but I think it may be technical as well because we knew those two issues on Friday," said analyst Phil Flynn at Price Futures. "I think everybody came in with record long positions and they decided to book profits due to the strong dollar. I still expect oil to bounce back going forward."

The latest Commitment of Traders report by the U.S. Commodity Futures Trading Commission shows money managers added a net 62,649 contracts of new purchases in oil futures on the NYMEX in the week-ended Sept. 26, boosting upside market risk to a cumulative 392,163 oil futures.

The complete noncommercial market sector was shown balancing a 594,478-contract long position that consisted of crude oil, RBOB and ULSD futures three days shy of the final third-quarter session.

On supply, surveys by Bloomberg and Reuters showed OPEC production rose in September after falling in August, with the increase last month due to a recovery in production by Libya and Nigeria.

Both OPEC members are exempt from an agreement by OPEC and 10 non-OPEC producers to cut production 1.8 million bpd effective January through March 2018. Recent negotiations by the producers to extend the cuts through either June or December 2018 have so far gone nowhere.

Total OPEC crude oil output increased by 50,000 bpd in September as the cartel's compliance with its agreement to cut production by 1.2 million bpd fell to 86%, according to Reuters. Bloomberg showed OPEC supply up 120,000 bpd to 32.83 million bpd last month. In late September, OPEC reported compliance with its agreement in August at 116%.

Nigeria last week lifted a force majeure on its Bony Light crude while Libya resumed production at its largest oilfield, Sharara, after two weeks of downtime caused by local militant sabotage. Libyan production is expected to reach 1.0 million bpd later this week, up from 800,000 bpd, said Mustafa Sanalla, head of the country's state-owned oil company.

On the domestic front, oil services firm Baker Hughes, Inc. on Friday reported the number of active U.S. oil rigs increased by six last week to 750, marking the first gain in four weeks. The drilling report followed Energy Information Administration data released Wednesday (9/27) showing U.S. crude oil production ramped up 37,000 bpd to 9.547 million bbl during the week-ended Sept. 22, up 1.05 million bpd versus a year ago and 1.4 million bpd above its five-year average.

NYMEX November West Texas Intermediate crude contract settled $1.09 lower at $50.58 bbl, off a $50.07 better than one-week low. December Brent crude futures trading on the Intercontinental Exchange declined 67cts to $56.12 bbl, off a 1-1/2 week spot low of $55.50 bbl, while closing at a $6.21 bbl premium to WTI.

NYMEX November ULSD futures settled 4.35cts lower at $1.7665 gallon, off a $1.7558 better than two-week spot low, while November RBOB futures declined 3.57cts to a $1.5553 gallon settlement, edging off a six-week spot low of $1.5421.

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