Oil Closes Sharply Lower Friday

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange (ICE) settled sharply lower for the third consecutive session Friday as selling pressure mounted amid discussions from key members of the Organization of the Petroleum Exporting Countries (OPEC) and 10 non-OPEC producers to increase oil production by as much as 1.0 million barrels per day (bpd) ahead of the next OPEC meeting in Vienna June 22.

The OPEC news follows in the footsteps of a supply-related selloff that began early Wednesday following the Energy Information Administration's (EIA) supply report showing large builds in commercial crude oil and gasoline inventories, catching many traders expecting continued draws on crude and products inventories off guard.

As a result, prices tumbled through key psychological levels for both West Texas Intermediate crude and international Brent crude, with the WTI contract declining below $70 barrel (bbl) for the first time since May 8. Brent crude, which briefly advanced through the $80-bbl mark Tuesday on heightened supply concerns stands at a level not seen since the first week of May.

RBOB gasoline, buoyed by stout U.S. gasoline demand and reduced refinery runs on seasonal maintenance earlier in the quarter, fell less though still settled near two-week lows. ULSD fell more, tracking with crude oil declines to the lowest level in three weeks.

At the 2:30 p.m. ET settlement, NYMEX July WTI futures settled $2.83 bbl lower to $67.88 bbl, its lowest settlement since May 8 and $3.40 bbl, or 4.8% less than a week ago. August WTI futures lost $2.80 bbl on the day to $67.78 bbl, while also falling 5% or $3.59 bbl on the week.

ICE July Brent also slumped, settling $2.35 bbl lower on the day to $76.44 bbl, and $2.07 bbl or 2.6% lower week on week. While down for the week as a whole, Brent values remain near 3-1/2 year highs on unresolved Mideast and Venezuelan supply issues. August Brent also posted a lower settlement value, closing $2.36 lower to $76.47 bbl and 2.6% lower on the week.

June RBOB futures settled 5.24 cents less on the day to $2.1814 gallon, while week-on-week comparisons showed at 5.2 cents drop for a 2.3% loss. June ULSD contracts settled about 5.7 cents lower on the day to $2.2098 gallon, while weekly comparisons showed at 5.6 cents or 2.5% decline.

Also adding to selling pressure traders say, is the fact that re-imposed U.S. sanctions on Iran may not reduce Iranian oil exports, as European Union countries remain at odds with the Trump administration as to whether Iran was ever in noncompliance with accord rules as Trump states.

Some analysts expect China as well as other non-OPEC members could increase oil purchases from Iran, albeit at steep discounts, especially during the expected 180-day sanctions implementation period, where companies doing business in Iran are expected to roll out of existing contracts.

A Joint Ministerial Monitoring Committee news release finds that April oil production by OPEC and non-OPEC was at 152% of agreed output target levels, demonstrating what it says is its "commitment to the restoration of market stability," intended to serve the long-term interests of producers, consumers, and the global economy, they said.

Voluntary production adjustments continue to maintain "outstanding levels of conformity to the terms of the December 2016 Declaration of Cooperation," they said, adding that the Joint OPEC, Non-OPEC Joint Operating Committee would continue to closely monitor the oil market and report fundamental changes to the OPEC Secretariat ahead of the next JMMC meeting in Vienna June 21, a day ahead of the highly anticipated June 22 OPEC meeting.

On the U.S. domestic supply front, Friday's Baker Hughes report revealed active oil rigs in the United States rose by 15 to a fresh 38-month high of 859 rigs, up 137 versus a year ago. With 112 rigs deployed year to date, the total represents the largest weekly increase since early February when the rig count surged by 26.

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