Oil Mixed After Choppy Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Tuesday afternoon, with January West Texas Intermediate crude easing after TransCanada restarted its Keystone pipeline, while ULSD futures eked out modest gains as forecast for a wintry chill in the Northeast is expected to boost heating demand.

"Heating oil is up because we expect colder weather," said David Thompson, executive vice president at Powerhouse. "Heating oil is consolidating and I think it's benefiting from the overflow trade from natural gas rally, which is more sensitive to weather."

The entire oil futures complex was off to a weak start this morning, but WTI and RBOB trimmed their losses after Reuters reported that the Organization of Petroleum Exporting Countries and Russia have agreed tentatively to extend their 1.8 million bpd in production cuts through the rest of 2018.

The report, which cited two OPEC sources, said the agreement to extend the output cuts by nine months has been agreed in principle by OPEC and 10 non-OPEC producers including Russia and could be announce at the summit set for Thursday (11/30) in Vienna.

The signatories to the deal will review the deal again next June. The deal has been widely expected, so it is priced in already, with prices likely to stay at current levels or retreat as speculators who had accumulated length move to sell, said Thompson.

"The OPEC cuts are baked in, so the question is whether or not Russia allows them to go ahead, and for me it's likely bearish," he said. Meantime, TransCanada today restarted its Keystone Pipeline that has been shut for nearly two weeks after a leak in South Dakota. The pipeline ships crude from the Canadian oil sands to the U.S. Gulf Coast, and its restart will ensure more Canadian supply flows to refineries in the Texas coast.

The market is also looking ahead to a weekly oil report from the American Petroleum Institute due at 4:30 PM ET. The market estimates average stock draws of 3.75 million bbl for crude and 1.25 million bbl for gasoline and distillates each for the week-ended Nov. 24. The Energy Information Administration's weekly oil supply report is due out at 10:30 AM ET Wednesday.

NYMEX January WTI crude futures settled 12cts lower at $57.99 bbl, off a $57.42 three-day low. January Brent crude settled 23cts lower at $63.61 bbl on the Intercontinental Exchange ahead of its expiration Thursday (11/30).

The February Brent contract was 14cts lower at $63.24 bbl at settlement.

In products trade, NYMEX December ULSD futures gained 0.29cts to $1.9507 gallon, with January contract up 0.24cts at $1.9529 gallon. December RBOB futures tumble 1.73cts to $1.7720 gallon settlement, with January contract down 1.65cts to $1.7686 gallon. The December RBOB and ULSD contracts will also expire on Thursday.

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