NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved higher Friday morning, recouping Thursday's losses on the back of a weakening U.S. dollar. Thursday's losses were also due to concern about geopolitical risks and the suggestion by Saudi Arabia that the Organization of the Petroleum Exporting Countries could extend their current two-year agreement to cut production through 2019.
Saudi energy minister Khalid al-Falih said late Thursday that OPEC and their 10 non-OPEC producer allies should continue their cooperation, and extend oil supply cuts of 1.8 million bpd beyond December 2018 as currently agreed, according to a Reuters report.
That comment came days after the OPEC/non-OPEC Joint Ministerial Monitoring Committee indicated they planned to change how they measure their goal of rebalancing the market.
The current goal is to reduce commercial oil inventory held by the 35 country members of the Organization for Economic Cooperation and Development to their five-year average. Going forward, they intend to limit supply in order to draw down OECD supply to their seven-year average, which would have the effect of extending their supply agreement through next year.
The ongoing production cuts have sharply cut down excess supply. JMMC last month reported that the supply overhang had been cut down by 220 million bbl as of January from an excess of 340 million bbl in January 2017 when the supply agreement took effect.
"OECD commercial stocks fell to 2,855 million barrels in February, further reducing the global inventory glut," JMMC said in a news release.
Oil futures were also underpinned by concerns about geopolitical risk after President Donald Trump on Thursday appointed John Bolton as national security advisor. Bolton is foreign policy hawk and has advocated the bombing of Iran and North Korea.
Earlier this week Trump met with Saudi Arabian Crown Prince Mohammed bin Salman, a hardliner in the Middle East opposed to the Iran nuclear deal. The latest development raises the prospect that Trump will decertify the 2015 Iran nuclear deal and impose additional sanctions on Tehran. Such a move could either trigger a reaction by Tehran or cut Iran's oil exports, said analysts.
Domestically, U.S. crude inventories dropped during the week-ended March 16 by 2.6 million bbl, while gasoline stocks fell 1.7 million bbl, the Energy Information Administration reported on Wednesday. Refineries are coming back from seasonal maintenance and gasoline demand is expected to increase ahead of the summer peak-driving season, analysts said.
In equities trade, the Dow Jones Industrial Average is up more than 100 points after plunging more than 700 points on Thursday on fear of a potential trade war. The dollar index was near a five-week low.
In early trade, NYMEX May West Texas Intermediate crude oil futures were 70cts higher at $65.00 bbl. May Brent crude on the Intercontinental Exchange gained 89cts to $69.80 bbl, off a $70.00 fresh seven-week spot high.
April ULSD futures climbed 2.02cts to $2.0125 gallon, near a seven-week spot high of $2.0157. April RBOB futures climbed 2.11cts to $2.0307 gallon, near a fresh 6-1/2 month spot high of $2.0343.
George Orwel can be reached at firstname.lastname@example.org
© Copyright 2018 DTN/The Progressive Farmer. All rights reserved.