Oil Futures Settle Monday Mixed

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mixed on Monday afternoon, with West Texas Intermediate crude oil and ULSD contracts lower on profit-taking and RBOB higher on stronger demand prospects.

"The market was overbought after last week's rally and there was this concern today that OPEC might not live up to expectations," said Phil Flynn, a senior analyst at Price Futures. "People are taking profits off the table as they wait for the OPEC meeting. But the market is off lows because of a strike threat by oil workers in Brazil."

Oil ministers from Organization of Petroleum Exporting Countries are heading to Vienna where along with representatives from 10 non-OPEC producing nations they are expected to extend the current production cuts of 1.8 million bpd through the end of 2018.

The OPEC-led production cuts were originally agreed to a year ago and implemented starting last January. They are set to expire in March 2018 unless extended on Nov. 30 in Vienna or at some later date.

OPEC Secretary General Mohammad Barkindo said "the fact that average conformity to the supply adjustments has been over 100% since the implementation of the decision on Jan. 1 of this year not only warms my heart personally, but has led to a new optimism in the oil market not seen for a very long time."

He said OPEC is moving towards achieving their goal of rebalancing the oil market, as global supplies are falling. After reaching record-high levels of more than 380 million bbl over the five-year average, oil inventories held by 35 countries that are members of the Organization for Economic Cooperation and Development have steadily fallen to stand 140 million bbl above the five-year average in October.

In addition, excess crude oil in floating storage has been drawn down considerably, by 50 million bbl since June 2017.

The market has priced in the OPEC agreement, 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.

"Prices might fall in the immediate aftermath of the [OPEC] deal as speculative length sells the news," said Michael Cohen, head of energy research at Barclays bank. "The level of the cut is what really matters, and on that point we assign a low likelihood to this detail being announced on November 30."

Flynn estimated that U.S. commercial crude stocks fell by 3.0 million bbl during the week-ended Nov. 24. Last week, the Energy Information Administration reported that domestic crude stock fell 1.9 million bbl during the week-ended Nov. 17, with crude production up 13,000 bpd to 9.658 million bpd, the highest in about 46 years.

There is concern among market bulls that continued increase in domestic output will undermine production cuts by OPEC.

NYMEX January WTI crude futures settled 84cts lower at $58.11 bbl after reversing from last Friday's off a 29-month high of $59.05. ICE January Brent crude was little changed ahead of its expiration set for Thursday (11/30), settling down 2cts at $63.84 bbl, off Friday's two-week high of $63.95. The February Brent contract settled 9cts lower at $63.38 bbl.

NYMEX December ULSD futures settled down 0.51cts to $1.9478 gallon. December RBOB futures contract settled 0.13cts higher at $1.7893 gallon.

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