CRANBURY, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were shallowly mixed in early trade Monday following Friday's selloff amid a confluence of factors during the current shoulder month, with the contracts holding above overnight lows.
After rallying Oct. 5 in response to the prospect of an extension to production cuts by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers and an approaching tropical storm, the market came under selling pressure as Tropical Storm Nate took a bearing away from oil infrastructure while an agreement for an extension of output cuts was essentially tabled by Russia.
Hurricane Nate made two landfalls over the weekend, first in southeast Louisiana near the mouth of the Mississippi River, and second near Biloxi, bypassing oil infrastructure. Nate, the fourth hurricane to make landfall on U.S. shores during the current Atlantic Basin hurricane season, had prompted oil and gas operators in the Gulf of Mexico to shut-in 90% of their wells. However, the quick moving storm is reported to have left no damage, and production is expected to restart quickly.
Late last week, Russian President Vladimir Putin and King Salman bin Abdulaziz Al Saud of Saudi Arabia met in Moscow when Putin appeared to give his approval to extend an agreement with the Organization of the Petroleum Exporting and nine other non-OPEC oil producers beyond a deadline at the end of the first quarter 2018 through the end of next year. Since then, Russia has indicated they would wait until March to better determine if an extension would be needed.
There has been a great deal of speculation regarding the OPEC, non-OPEC agreement, which took effect on Jan. 1, and sets a quota reducing 1.8 million bpd of oil production. After eight months through August, the production cuts were credited, alongside strong global demand, in working down a supply surplus held by the Organization for Economic Cooperation and Development by 168 million bbl. However, commercial inventory held by the 35 countries that make up the OECD was still 170 million bbl more than their historical five-year average, with OPEC indicating a goal of their agreement was to erase the surplus.
Over the weekend, OPEC Secretary General Mohammed Barkindo suggested additional measures might be taken to restore market stability. Previous speculation in addition to extending the timeline for the agreement is to deepen the production cuts by 1%, and to bring into the pact exempt OPEC members Nigeria and Libya. OPEC meets Nov. 30 in Vienna.
At 9:30 AM ET, NYMEX November West Texas Intermediate futures were up 35cts at $49.64 bbl after testing Friday's nearly one-month spot low at $49.10 bbl with a $49.13 print. ICE December Brent futures were little changed, up 5cts at $55.67 bbl after trading overnight at a $55.06 three-week low on the spot continuous chart.
NYMEX November ULSD futures were down 0.56cts at $1.7383 gallon, paring an overnight decline to a $1.72 three-week spot low. NYMEX November RBOB futures were down 0.64cts at $1.5524 gallon after trading at a $1.5366 gallon three-month spot low under pressure from seasonal features.
Brian Milne can be reached at email@example.com
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