Oil Futures Mixed Ahead of API

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed for a second day, with West Texas Intermediate crude trading at a 1-1/2 week high of $66.70 bbl ahead of supply data from the American Petroleum Institute.

Ahead of the close at midday, the Energy Information Administration released its Short-term Energy Outlook that revised lower its projection for WTI prices for 2018 by $1.05 bbl from a month ago to $64.53 bbl, which compares with a 2017 average of $50.79 bbl. For 2019, EIA said WTI could average $61.95 bbl, up $1.07 from its outlook in May.

"Although transportation constraints to the U.S. Gulf Coast are primarily affecting Permian Basin crude oils, the rapid increase in the Brent-WTI futures price spread in May and early June suggests some constraints are developing in crude oil transported from Cushing, Oklahoma, where the WTI futures contract is delivered, to the Gulf Coast," EIA said in its STEO. "Because transportation options out of Cushing are limited, it remains uncertain how much the spread could narrow if Gulf Coast refiners increase refinery runs, which were lower than expected in May."

For Brent crude, EIA revised higher its price outlook for this year and next, expecting Brent to average $71.06 bbl this year, revised up $0.38 from its May outlook, and to $67.74 bbl for 2019, an upward adjustment of $1.76. In 2017, Brent crude averaged $54.15 bbl.

EIA's STEO shaved 230,000 bpd off its 2018 outlook for global oil to 100.22 million bpd and by 430,000 bpd for 2019 for projected supply of 102.64 million bpd. The outlook calls for world oil supply to increase 2.21 million bpd or 2.3% this year from 2017 and by 1.99 million bpd or 2.0% year-on-year in 2019.

The steep revisions are due to adjustments in its outlook for Organization of Petroleum Exporting Countries oil supply for both years, reduced in 2018 by 240,000 bpd to 38.98 million bpd and for 2019 by 300,000 bpd to 39.21 million bpd. In 2017, EIA estimates OPEC oil output at 39.28 million bpd.

Crude production by OPEC edged up 35,400 bpd to 31.869 million bpd in May, according to secondary sources cited by OPEC in their Monthly Oil Market Report released this morning, 1.774 million bpd below their October 2016 output rate. May's output rate shows OPEC continued to over comply with their production agreement reached in November 2016 to reduce output 1.2 million bpd below the October rate, which OPEC data shows was 33.643 million bpd.

EIA today also revised higher its outlook for U.S. oil production this year, revising its projection 90,000 bpd from month prior to 10.79 million bpd, an output rate reached during the week ended June 1, EIA's weekly data shows. EIA's outlook forecasts domestic production to reset the record high at 11.76 million bpd in 2019.

Shortly after 2:30 PM ET, NYMEX July WTI futures settled 26cts bbl higher to $66.36, while August WTI futures rose 25cts to $66.28 bbl.

ICE August Brent, settled 58cts less at $75.88 bbl, while September Brent finished 54cts lower at $75.65 bbl.

NYMEX July RBOB futures fell 1.5cts to settle at $2.0899 gallon, while August RBOB futures declined by 1.42cts to $2.0789 gallon in the seasonally backwardated market.

July ULSD edged fractionally higher to $2.1618 gallon, while the August USLD contract slid fractionally to $2.1644 gallon at settlement.

Traders are waiting on today's release of supply data from the API at 4:30 PM EDT, with weekly EIA data due out Wednesday morning.

According to Dominick Chirichella with the Energy Management Institute, crude oil stocks likely declined last week on increased refiner demand, while oil products supply likely rose.

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