Oil Mixed in Friday Trade

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange (NYMEX) oil futures and Brent crude on the Intercontinental Exchange were mixed early Friday after a volatile week of trade, with bullish geopolitical developments pushing with West Texas Intermediate (WTI) and Brent crude grades to 40-month settlement highs midweek.

NYMEX May ULSD futures settled at a 38-month high on its spot continuous chart Thursday, with backwardated ULSD futures bolstered by ongoing decline in distillate fuels, which were drawn down to a 40-month low last week.

NYMEX RBOB futures settled at an eight-month spot high midweek on expectations for strong demand this summer amid peak driving demand, with implied gasoline demand reaching a record weekly high earlier this month.

NYMEX May ULSD and RBOB futures expire at Monday's closing bell alongside the June Brent contract expiration on ICE.

In early trading, NYMEX May ULSD futures eased 0.18 cents to $2.1582 gallon while the June contract was marginally lower at $2.1411 gallon. NYMEX May RBOB futures added 0.34 cents to $2.1151 gallon and June delivery added 0.43 cents to $2.1209 gallon, with RBOB futures set to flip in backwardation with the May contract expiration.

ICE June Brent crude futures were 11 cents lower at $74.63 barrel (bbl) and the July contract declined 14 cents to $73.74 bbl.

Brent crude settled at a $6.55 bbl four-month high premium to WTI futures on increasing geopolitical tensions and record high oil production in the United States. A stronger U.S. dollar, trading at a fresh 3-1/2 month high Friday morning, is also weighing on WTI futures.

NYMEX June WTI futures declined 26 cents to $67.93 bbl in early trade.

Oil futures could see short covering gains Friday afternoon as a May 12 deadline regarding the 2015 Iranian nuclear accord nears. French President Emmanuel Macron during a state visit at the White House on Tuesday proposed a revamped agreement in an effort to address concerns U.S. President Donald Trump has with the pact. Trump has pledged to withdraw the United States from the accord by May 12, a deadline in the agreement for the U.S. President to certify that Iran is in compliance with the terms of the accord.

Trump appeared to be open to negotiating a new agreement, suggesting he might not decertify the pact, which would re-impose sanctions on Iran that could reduce Iranian crude exports by 350,000 barrels per day (bpd), some analysts suggest. However, Macron later told media during this three-day trip to the United States that he believed Trump would withdraw from the agreement for domestic reasons.

German Chancellor Angela Merkel meets with Trump at the White House Friday morning, when she is expected to persuade Trump to forgo previously announced trade tariffs and to remain in the Iranian nuclear accord.

News this week of increased attacks by Houthi rebels against Saudi Arabian oil installations also boosted the risk premium in oil prices. Reports indicate this is a new strategy by the Houthis in their three-year war with Saudi Arabia. Saudi Arabia is leading a coalition in Yemen to oust the rebels, with the Houthis supported by Iran, although Tehran denies involvement in the conflict.

Brian Milne can be reached at brian.milne@dtn.com

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