Oil Ends the Day Lower

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower on Monday afternoon, pulling back amid a stronger dollar and profit-taking following last week’s rally.

The U. S. currency rose Monday after the Senate approved a major tax overhaul over the weekend, a move that could boost oil investments. The oil market and the greenback have an inverse trading relationship.

“We went into the weekend with a lot of net long positions, so this is just profit-taking today,” said senior analyst Phil Flynn at Price in Chicago. “We are in a wait-and-see mode, and will probably bounce back if we get a bullish inventory report tomorrow.”

Speculative positions in crude oil futures increased to a record high during the week-ended Nov. 28, data from the Commodity Futures Trading Commission shows.

The data shows combined open interest in West Texas Intermediate, RBOB and ULSD futures fell by a combined 67,418 contracts, while underlying commodity prices remained in a strong uptrend.

Speculative inflows were key to the recent oil rally in advance of last week’s decision by the Organization of Petroleum Exporting Countries and their non-OPEC allies to extend their output cuts of 1.8 million bpd for the rest of 2018.

However, comments by Saudi Arabian Energy Minister Khalid al-Falih to the effect that OPEC will meet next June to discuss when they would start raising production prompted concerns that OPEC is looking for an exit strategy so soon, even before achieving their goal of balancing the market.

In addition, the market remains concerned about rising U.S. production that would offset the OPEC-led production cuts. Baker Hughes on Friday reported the number of active oil rigs rose by two to 749 last week, while 272 higher than the comparable year-ago period.

That report suggested domestic production would continue higher and it came after the Energy Information Administration reported U.S. crude production rose 24,000 bpd to a fresh 46-year high of 9.682 million bpd during the week-ended Nov. 24, up 983,000 bpd versus same time frame in 2016.

At settlement, NYMEX January WTI crude oil futures were 89cts lower at $57.47 bbl after inside trade. ICE February Brent crude was $1.28 lower at $62.45 bbl, off a $62.31 two-week spot low. The Brent premium to WTI fell to a $4.98 one-week low.

NYMEX January ULSD futures fell 4.68cts to a $1.8945 gallon settlement, with January RBOB futures settling down 4.94cts to $1.6922 gallon, off a $1.6908 five-week spot low.

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