Oil Futures End Thursday Mixed

Oil Futures End Thursday Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Thursday afternoon with the West Texas Intermediate crude contract eking out a modest gain. Meanwhile, RBOB and ULSD futures tumbled despite a decision by the Organization of the Petroleum Exporting Countries and their non-OPEC partners to extend their production cut agreement through the end of next year.

OPEC and their 10 nonmember producer partners implemented output cuts of 1.8 million bpd in January, which were set to expire in March 2018. Thursday's agreement means the cuts would continue for nine additional months, but with a review set for June 2018 to take stock of market conditions. OPEC said all parties to the agreement have pledged full and timely compliance.

OPEC also decided to cap the combined output of Nigeria and Libya at 2017 levels below 2.8 million bpd, with both countries exempt from the current cuts.

Analysts said the June 2018 review of the policy was an acknowledgment of Russia's concerns about further production cuts, which is hurting their industry. Moscow has reportedly been calling for a strategy to exit the production cuts.

The market will now closely keep watch on compliance with the agreement, added analysts.

OPEC Secretary General Mohammad Barkindo said early this week that they have made tremendous progress in their efforts to realize their goal of eliminating a global supply surplus.

After reaching record-high levels of more than 380 million bbl over the five-year average, 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, Barkindo said.

Phil Flynn, a senior analyst at Price Futures, said oil futures also came under pressure after the Energy Information Administration issued its monthly Petroleum Supply report estimating an average U.S. crude oil production rate of 9.48 million bpd in September. That's up 290,000 bpd from August, and the highest monthly output rate since April 2015. "The monthly forecast for production took away any upside momentum we might have had," said Flynn.

On Wednesday, EIA's Weekly Petroleum Status Report showed domestic crude oil production increased again last week, rising 24,000 bpd to a fresh 46-year high of 9.682 million bpd, and up 983,000 bpd versus a year earlier. Analyst are concerned U.S. output increases could offset the OPEC production cuts.

NYMEX January WTI crude oil futures settled 10cts higher at $57.40 bbl after inside trade. ICE January Brent crude oil contract expired 46cts higher at $63.57 bbl, off a three-week high of $64.21. The February Brent contract settled 10cts higher at $62.63 bbl. The Brent premium over WTI closed trade at $6.17 bbl.

In products trade, December ULSD futures dropped 2.94cts to a $1.8927 gallon expiration, off a $1.8880 two-week low, and the January contract falling 2.62cts to a $1.8976 gallon settlement. December RBOB futures expired 0.25cts lower at $1.7284 gallon, off a one-week low of $1.7178, and the January contract settled 0.39cts lower at $1.73 gallon.

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