NYMEX Dec ULSD, RBOB Futures Retreat

NEW YORK (DTN) -- New York Mercantile Exchange spot-month West Texas Intermediate futures ended flat and oil products edged lower after trading on either side of Friday's settlements.

"The modest losses were largely due to correction after recent gains and as we wait for more short-term data from API tomorrow," said Tom Bentz at ABN AMRO.

The tempered price action also follows a bullish outlook by the Organization of the Petroleum Exporting Countries released this morning, which lifted their expectation for global oil demand while trimming projections for non-OPEC oil production. OPEC, citing secondary sources, also reported a decline in the producer group's crude production in October.

In contrast, the Energy Information Administration forecast an 80,000 bpd monthly increase in U.S. unconventional oil output for December to 6.174 million bpd in its monthly Drilling Productivity Report this afternoon.

EIA's DPR came on the heels of Friday's weekly data from Baker Hughes that showed the number of rigs drilling for oil in the United States jumped by nine last week to a 738 one-month high. EIA's Weekly Petroleum Status Report last week also showed domestic crude production rose by 67,000 bpd to a 9.62 million bpd 2-1/2 year high during the week-ended Nov. 3.

Earlier, OPEC's Monthly Oil Market Report for November boosted their world oil demand projection for 2017 by 74,000 bpd for year-on-year growth of 1.53 million bpd to 96.94 million bpd. The upward revision was driven by stronger-than-expected consumption in China, OPEC said.

For 2018, OPEC adjusted their projection for world oil consumption up 130,000 bpd for annual growth of 1.51 million bpd to 98.45 million bpd, reflecting the improved expectations from most of Europe, Asia and some African countries.

On supply, OPEC trimmed their estimate for non-OPEC oil production by 20,000 bpd for this year from month prior for annual supply growth of 650,000 bpd at 57.67 million bpd. For 2018, OPEC projects non-OPEC oil output at 58.54 million bpd for year-on-year supply growth of 870,000 bpd, revised down by 90,000 bpd.

The report, citing secondary sources, said OPEC crude production in October decreased by 151,000 bpd to average 32.59 million bpd. This suggests OPEC maintains strong compliance with its agreement cutting production.

OPEC will meet on Nov. 30 to discuss its 15-month crude production policy. There's expectation OPEC and the 10 non-OPEC oil producing countries that are part of the supply pact will agree to extend their current production cuts through the end of 2018 instead of March 2018.

Analysts said the lower OPEC production for October shows the group is serious about eliminating a supply surplus held by the 35-country members of the Organization for Economic Cooperation and Development.

"OPEC has been saying all the right things and today's report shows market rebalancing will come quicker," said Bentz.

In their MOMR, OPEC said commercial oil inventories held by OECD in September were drawn down 23.6 million bbl to 2.985 billion bbl. That reduces the supply surplus against the five-year average to 154 million bbl. The surplus was at 340 million bbl at the start of 2017.

NYMEX December WTI crude futures settled 2cts higher at $56.76 bbl and January Brent on the Intercontinental Exchange was 36cts lower at $63.16 bbl, settling at a $6.40 bbl premium to WTI. NYMEX December ULSD futures settled 0.28cts lower at $1.9321 gallon and December RBOB futures settled 1.95cts lower at $1.7929 gallon.

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