Oil Futures Settle Mixed

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mixed Monday afternoon, with the West Texas Intermediate and ULSD contracts higher for the third straight day on bullish psychology driven by hopes the global oil supply glut would end by late next year.

Analysts said the oil market is now well into a cyclical upswing and over the next several months the market narrative about rebalancing is likely to be replaced by one about tightening.

"We are looking at a tightening market and so there's underlying oil support," said analyst Phil Flynn at Price Futures. "Having closed above $54 today, there is momentum to continue higher."

Reports also cited Saudi Arabian energy minister Khalid al-Falih as saying the Saudis were pushing to extend their agreement with Russia and other members and nonmembers of the Organization of the Petroleum Exporting Countries to cut production by 1.8 million bpd through late 2018, when they expect production to be more balanced with global demand. Currently, the oil supply cuts are set to end in March 2018, but Falih and his Russian counterpart Alexander Novak have started negotiations to extend the cuts by nine months. So far, they've got the backing of Saudi Arabian Crown Prince Mohammed bin Salman and Russian President Vladimir Putin. Now, they need other signatories to the deal to buy into the extension plan.

Domestically, Energy Information Administration data issued last week for the week ended Oct. 20 showed crude exports soared to nearly 2.0 million bpd and refinery crude inputs rose 586,000 bpd as runs jumped 3.3%.

On products, gasoline stocks tumbled 5.5 million bbl while distillate fuel supply declined 5.2 million bbl, missing expectations. EIA also showed implied demand for gasoline rose 178,000 bpd on the week while implied demand for distillates surged 624,000 bpd.

The RBOB contract Monday bucked the uptrend, pulling back from a two-month high to close in negative territory after reports said the U.S. Congress was thinking of phasing in the planned cooperate tax cuts over five to seven years rather than giving companies an immediate tax break as part of the tax reform being considered, said Flynn.

"The market is disappointed by the tax cuts news because it would have an impact on oil demand," Flynn added. "Tax cut is a temporary issue ... What we see generally is a change in market psychology. The contango and the spreads are telling us they anticipate higher prices in the future."

Money managers were buyers of NYMEX crude oil, RBOB and ULSD futures during the week ended Oct. 24, the Commodity Futures Trading Commission reported.

NYMEX December WTI crude settled 25cts higher at $54.15 bbl, off an eight-month spot high of $54.46. December Brent crude futures on the Intercontinental Exchange surged 46cts to a $60.90 bbl settlement, off a fresh 28-month spot high of $61, ending at a $6.75 bbl premium to WTI, the highest in five weeks. A day ahead of December Brent contract's expiration on Tuesday, the January Brent contract today settled 46cts higher at $60.59 bbl.

NYMEX November ULSD futures settled up 1.08cts at $1.8777 gallon ahead of its expiration Tuesday, trimming an advance to a $1.8825 28-month spot high. The December contract settled 1.0cts higher at $1.8762 gallon. November RBOB futures nudged 0.45cts lower to $1.7641 gallon, reversing off a two-month spot high of $1.7783 while the December contract settled down 0.42cts at $1.7132 gallon.

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