Oil Futures Settle Friday Mixed

OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange West Texas Intermediate crude oil futures and Brent crude oil on the Intercontinental Exchange settled lower Friday as reduced geopolitical tensions and continued record U.S. oil production reduced trader concern about oil supply, while NYMEX oil products ended mixed. June WTI closed $0.09 lower to $68.19 bbl, while like-month Brent crude futures slipped $0.10 to $74.64 bbl and July Brent ended down $0.09 to $73.79 bbl.

"We closed the week on a bit of a down note, but not too much," said Alan H. Levine, CEO of Washington D.C.--based Powerhouse, a commodity hedge and trade advisory. "The general thrust of these markets over the last few weeks has been higher, and I think that will be the case for the next few weeks as well."

Levine said uncertainty about sanctions on Iran, and various oversees issues have affected oil futures prices. "I've been told Mexican refineries are operating under 40 percent of capacity, and Venezuela, under 10 percent, Levine said. "With demand what it is, you have to go somewhere, and that is the United States."

Levine predicted distillates prices could approach $2.30 gallon, a level not seen since February 2015.

May NYMEX ultra-low sulfur diesel futures declined $0.0091 gallon to $2.1509 gallon, after settling at a 38-month spot high of $2.160 on Thursday. The May NYMEX ULSD contract expires Monday 2:30 PM ET, when June becomes the prompt month. June ULSD futures fell $0.0073 bbl to $2.1343 gallon.

Overall, futures prices were mixed on the week, declining early on speculation the United States might take initiatives to restructure its 2015 Iran nuclear agreement. Values later trended up following Tuesday's meeting with French President Emmanuel Macron, who despite his hope to certify the deal, supposed that U.S. President Donald Trump would likely decertify the agreement May 12, causing the re-imposition of Iranian sanctions, and its potential loss of 350,000 bpd of Iranian crude exports.

NYMEX oil products prices, specifically RBOB gasoline, recently have been bolstered by strong U.S. demand, despite bearish weekly Energy Information Administration gasoline data showing an 800,000 bbl build to 236.8 million bbl for the week ended April 20. May RBOB gasoline rose $0.0146 to $2.1269 at settlement, while the June contract, which becomes the prompt month after Monday's close, increased $0.0113 to $2.1279 gallon.

Prior to Friday's low-key White House meeting and later at a joint press conference between German Chancellor Angela Merkel and Trump, futures edged higher as the U.S. president commented, "Iran will not be doing nuclear weapons."

Iran, for its part, said there is no "Plan B" to the existing accord, and that "it's either all or nothing." Meanwhile, reports continue to circulate that oil traders may already be steering clear of Iranian oil contracts valid after May 12. Estimates from FGE and Gunvor SA say that 500,000 bpd of Iranian oil could be at risk this year because of U.S. sanctions.

Futures also turned higher midday following statements from U.S. Secretary of State Mike Pompeo saying Trump was unlikely to recertify the current Iranian nuclear deal without "substantial changes."

Crude prices eased as Baker Hughes weekly oil rig report showed increases for the fourth consecutive week to 825 rigs, a rise of five from the prior report.

Baker Hughes reported companies added 28 oil rigs so far in the second quarter and 78 year-to-date. At 825, the U.S. oil rig count is at its highest since March 2015, while up 128 against year prior.

Total U.S. oil and gas rigs rose eight this week to 1,021, 151 more than a year ago, while in Canada, oil rigs slipped five to 33, while up nine on the year. The overall Canadian oil and gas rig count fell by eight to 85, which is flat against a year ago.

Brian Whary can be reached at brian.whary@dtn.com