NEW YORK (DTN) -- New York Mercantile Exchange oil futures were mixed with a downside bias Monday morning as the market consolidates in front of a key meeting by the Organization of Petroleum Exporting Countries that's expected to extend the current production cuts through the end of 2018.
OPEC and their 10 nonmember partners are heading to Vienna for their biannual summit on Thursday to discuss market conditions, but the key item in their agenda is a proposal by Saudi Arabia to extend their combined output cuts of 1.8 million barrels per day (bpd) beyond the March 2018 deadline.
The market has priced in an agreement to prolong the cuts and traders are now long beyond the Vienna OPEC meeting, with Barclays bank saying the key issue is the level of production quotas going forward. That's partly why the market is expected to be volatile this week, with the focus on Saudi Arabia, Russia, Kuwait and United Arab Emirates.
"This week, we expect volatile prices as market participants shed strength," said Michael Cohen, head of energy research at Barclays bank. "Prices might fall in the immediate aftermath of the deal as speculative length sells the news. Still, fundamentals should keep Brent at an average of $60 per barrel this quarter."
He added, "The level of the cut is what really matters, and on that point we assign a low likelihood to this detail being announced on Nov. 30."
Today is also the first full-day trading day after last week's Thanksgiving holiday. Baker Hughes reported the number of active oil rigs in the United States rose by nine to 747 during the week ended Nov. 22 while 273 higher than the comparable year-ago period.
Also last week, the U.S. Energy Information Administration reported that domestic crude stock fell 1.9 million bbl while gasoline supply rose by 44,000 bbl and distillate supply added 269,000 bbl during the week-ended Nov. 17.
The data also showed crude production rose by 13,000 bpd to 9.658 million bpd for the week reviewed and the highest in about 46 years. There is concern among market bulls that continued increase in domestic output will undermine production cuts by OPEC.
At last look, NYMEX January West Texas Intermediate crude futures dropped 70 cents to $58.25 barrels (bbl), reversing last week's off a 29-month high of $59.05 posted last Friday. The WTI was overbought, with initial support pegged at $54.81.
ICE January Brent crude was little changed this morning, down 7 cents to $63.79 bbl, off Friday's two-week high of $63.95. NYMEX December ULSD futures were down 0.11 cent to $1.9518 gallon. December RBOB futures contract gained 0.27 cent to $1.7907 gallon.
George Orwel can be reached at firstname.lastname@example.org
© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.