Oil Mixed in Thursday Trade

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were mixed Thursday morning as traders mulled disappointing U.S. crude production data against fresh bullish comments from Russia suggesting the world's major oil producing nations would eventually agree to extend production cuts through the end of next year.

The Energy Information Administration on Wednesday reported U.S. crude oil production rose 46,000 bpd to a one-month high of 9.553 million bpd during the week-ended Oct. 26. That data point was bearish because it suggested that U.S. output continues a pace and dampened hopes that the global oil surplus could be wiped out by next year.

EIA also showed demand for distillates tumbled 567,000 bpd last week to 3.534 million bpd while 8.5% lower versus a year earlier. Demand for gasoline was higher, rising last week by 147,000 bpd while 3.0% higher year-on-year.

However, the market has not substantially changed its bullish posture and any downside for WTI and Brent crude oil is likely to be curbed by Russian energy minister Alexander Novak's comment. Novak said their agreement with the Organization of the Petroleum Exporting Countries to cut production by 1.8 million bpd would be extended beyond March 2018.

OPEC has not yet achieved its main goal of rebalancing the market by reducing global crude stocks to their five-year average. As a result, OPEC members and 10 non-OPEC producers including Russia have been discussing extending the cuts by nine months to December 2018.

Saudi Arabian Crown Prince Mohammed bin Salman and Russian President Vladimir Putin have given their stamp of approval for the plan to extend the cuts, but all of the signatories to the current supply deal will have to agree, and the Russians have suggested the final deal won't come until close to the current March 2018 deadline.

OPEC will meet on Nov. 30 to review supply policy. The current supply agreement that took effect last January was reached nearly a year ago.

Meantime, traders will also look to U.S. dollar strength, which eased on reports President Donald Trump will nominate Jerome Powell as the next Chairman of the U.S. Federal Reserve today. Powell is currently a Fed governor who is not expected to deviate much from the current monetary policy course charted by Chair Janet Yellen.

Although a Republican, Powell is considered a Yellen ally and has voted with her throughout the past few years. A former banking lawyer, Powell is widely expected to cut regulatory burden on financial institutions that often trade commodities such as oil.

At 9:00 AM ET, NYMEX December WTI crude futures were little changed, down 4cts at $54.26 bbl. ICE January Brent contract was 20cts lower at $60.29 bbl.

The Brent premium over WTI eased to $6.03 bbl from $6.16 bbl on Wednesday and sliding from Tuesday's $6.98 two-year high, with a wider arbitrage supporting U.S. crude exports.

In products trade, NYMEX December ULSD futures were 1.37cts lower at $1.8488 gallon and December RBOB futures gained 0.94cts to $1.7439 gallon.

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