Oil Continues Higher Early Monday

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange continued higher in early trading ahead of Monday's meeting between U.S. Vice President Mike Pence and British Foreign Secretary Boris Johnson in a last-ditched effort by the British official to save the 2015 Iran nuclear deal.

Ahead of Saturday's (5/12) self-imposed deadline by U..S President Donald Trump, the market remains bullish given strong demand and media reports Friday indicating Iran could be poised to restart its idled nuclear plant.

At 9:05 AM ET, NYMEX June West Texas Intermediate crude oil futures rose $0.90 at $70.62 bbl, with ICE July Brent up $1.02 to $75.89 bbl. NYMEX June RBOB futures were up $0.0215 to $2.1355 gallon with the June ULSD contract also higher at $2.1722 gallon.

"I think certainly in the short run there's a lot of concern over the Iranian deal and what that would mean about the availability of supply," said Alan Levine, CEO of Washington D.C.-based PowerHouse, a commodity hedge and trade advisory. "All of this recent news about the deal is part of a larger bullish scenario that we've been describing over the last few months."

Should the U.S. re-impose sanctions on Iran, analyst's estimate exports of crude oil from the troubled nation could decline between 300,000 bpd to as high as 1 million bpd.

Levine also said strong domestic crude demand and continuing issues with Latin American supply as underpinning prices.

Recent Organization of Petroleum Exporting Countries data through December 2017 indicates oil output from Venezuela has fallen nearly 11% year on year to 1.923 million barrels a day, down from 2.159 mbd in 2016. Output was off more than 19% from 2015 levels, OPEC data indicates. Mexican refineries were recently reported as operating at about 40% of capacity.

On the domestic front, weekly data from the EIA shows refinery utilization rates at 91.1% of capacity as of April 27, while operable capacity is steady at 16.561 million bpd.

The American Petroleum Institute releases its weekly supply estimates tomorrow. Traders expect it to show continued strong demand for U.S. crude and draws on gasoline inventories as the official start of the U.S. driving season approaches.

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