Oil Futures Down Thursday Morning

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures traded lower Thursday morning on concern about rising domestic crude oil output and concern that the Organization of the Petroleum Exporting Countries may not agree on Nov. 30 to extend their production cuts beyond March 2018.

The Energy Information Administration on Wednesday reported that U.S. crude production increased last week by 25,000 barrels per day (bpd) to a 46-year high of 9.645 million bpd, up 964,000 bpd over a year ago. Total commercial petroleum inventories rose 2.8 million barrels (bbl) during the week-ended Nov. 10, with crude oil stockpiles unexpectedly rising 1.9 million bpd, the reported added.

"The first total inventory build since Sept. 8 came on the heels of higher crude imports and lower total petroleum demand," said analyst Kyle Cooper at IAF Advisors. "Based on company E&P reports, [production] should continue climbing, at an average pace of 20-25,000 bpd per week."

Total product supplied to the market, a proxy for demand, declined last week by 1.546 million bpd to 19.755 million bpd, while down 436,000 bpd versus a year ago, the EIA data showed.

Globally, the International Energy Agency's downward revision in its demand outlook on Tuesday negated OPECs bullish oil demand outlook on Monday.

Although Russia has indicated support to extend production cuts of 1.8 million bpd by OPEC and non-OPEC beyond March 2018, the Kremlin is now reluctant to enshrine that in an agreement at the Nov. 30 OPEC meeting in Vienna because the Russians think that it's too soon to make that decision.

Bloomberg News reported that executives of Russian oil companies met with their energy minister Alexander Novak on Wednesday but they had mixed opinions about the idea of extending the production cuts. As a result, the market isn't certain that an extension of the oil production cuts will happen.

Since noncommercial traders are heavily weighted to the long side on NYMEX oil futures, some are looking to sell after recent multi-week highs, said analysts.

At 9 a.m. EST, December West Texas Intermediate crude oil futures were down 18cts at $55.15 bbl, with the contract consolidating in front of it Nov. 20 expiration. Support is pegged at $54.17.

January Brent crude fell 32 cents to $61.55 bbl on the Intercontinental Exchange. NYMEX December ULSD futures was down 0.60 cent to $1.9027 gallon and December RBOB futures declined 1.21 cents to $1.7267 gallon, off a near three-week low of $1.7222.

The December RBOB contract's premium to the January contract is tight at 0.53 cent per gallon as seasonal demand wanes, with gasoline demand in January and February the weakest of the year.

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