Oil Futures Post Sizeable Gains

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were sharply higher Thursday, with oil products contracts posting their first day-to-day contract gains in a week amid heightened trader concerns regarding Venezuela's ability to export crude oil and finished products in June.

At the 2:30 PM ET settlement, NYMEX July RBOB futures rose 4.48 cents gallon to $2.1148 gallon, its highest settling price in three trading sessions and the first day-to-day gain since May 30, while August RBOB futures rose 4.09 cents gallon to $2.1042 bbl, its highest closing price since Monday in the seasonally backwardated market.

July ULSD jumped 5.33 cents gallon to $2.1799 gallon at settlement, its highest closing in four trading sessions, and the first day-to-day increase in a week, while the August USLD contract rose nearly 5.2 cents gallon to $2.1839 gallon at settlement, also its highest since May 31.

While WTI and Brent crude futures each moved sharply higher on the day, RBOB gasoline and ULSD each rose more than 2% on the day, even as Wednesday's Energy Information Administration data showed demand was down sharply for oil products while inventories gained against prior week levels.

NYMEX July West Texas Intermediate futures settled $1.22 bbl higher, a nearly 1.9% gain, to $65.95, while August WTI futures rose $1.19 bbl to $65.89 bbl.

ICE August Brent, jumped $1.96 bbl, or 2.6% to $77.32 bbl, its highest level since May 31, while September Brent rose even more, settling $2.02 higher to $76.98 bbl, also its highest price in a week. The spread between Brent and WTI settled today at $11.37 bbl, a new 40-month Brent premium high.

The spread has widened sharply since late May, as climbing U.S. crude production weighs on WTI futures and production cuts by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producing countries including Russia underpin support for Brent, the international crude marker.

Market bulls assert global oil supplies could be in jeopardy in lieu of declining exports of crude oil and finished oil products from Venezuela, and the potential impact new oil and economic sanctions on Iran and possibly Venezuela might have on exports.

A media report from Reuters early today indicated tankers waiting to load more than 24 million bbl of crude are sitting off Venezuela's main oil port. Media reports also indicated Wednesday (6/6) that June production from Venezuela, a member of OPEC, may be in doubt as PDVSA could potentially default on a sizeable portion of its 1.5 million bpd delivery obligations. Reports indicate PDVSA can deliver only 694,000 bpd or 53.7% of current obligations to export markets, forcing the firm to consider declaring force majeure on remaining balances.

Media reports also indicate Conoco Phillips' recent seizure of PDVSA export assets in the Caribbean is forcing PDVSA to redirect tankers to its own ports, which lack the necessary loading capacity to avoid delays.

Elsewhere, crude oil exports from OPEC countries are expected to increase for a third consecutive week through June 23 after six straight weekly declines, according to tanker tracker Oil Movements.

Oil Movements is a respected tanker tracking company run by Halifax, England-based shipping analyst Roy Mason who uses spot bookings and other sources to estimate weekly oil exports from the 14-member OPEC nations

OPEC crude oil exports averaged 24.86 million bpd in 2017, down 406,000 bpd or 1.6% from 2016, while production from the 14 members dropped 2.8% to 926,000 bpd in 2017 against the year prior, according to OPEC's Annual Statistical Bulletin, released Thursday.

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