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 down Thursday, as previously reluctant members of the Organization of the Petroleum Exporting Countries appear close to agreement on additional supplies likely to be made available following Friday's meeting in Vienna.
OPEC members appear more agreeable at the moment to Saudi Arabia's offer of a 1.0-million-barrel-per-day (bpd) increase in output compared with a smaller boost ranging from 300,000 bpd to 600,000 bpd discussed midweek, though sharply lower than non-OPEC leader Russia's 1.5 million bpd suggestion.
After initial resistance from some OPEC members, namely Iran and Venezuela, it now appears output is likely to be raised, and the increased likelihood continues to exert downward pressure on the market, analysts said.
News reports overnight indicated Saudi Arabia's oil minister Khalid al-Falih was optimistic the group would reach a deal to increase output, but the size of the increase would "depend on consensus." And while consensus is important for news headlines, analysts say Saudi Arabia is prepared to act alone if consensus isn't achieved.
The likelihood of supply increases from OPEC and non-OPEC membership as well as bearish oil products supply data released Wednesday from the Energy Information Administration has contributed to across-the-board declines in oil futures today, with a smaller loss for West Texas Intermediate crude futures as U.S. crude supplies fell sharply for the week.
OPEC and its 10-nation non-OPEC oil contingent agreed in late 2016 to cut output by 1.8 million bpd from October 2016 levels to trim a supply glut in the global market. They began implementing the agreement in January 2017 and later extended it until the end of this year. The agreement, which in its 18th month of the two-year term, has brought the market "back in balance," OPEC said recently.
According to Phil Flynn, senior market analyst with the Price Futures Group, Saudi Arabia estimates that actual supply cuts are closer to 2.8 million bpd because of involuntary output declines.
Much of that larger reduction in supply from OPEC is due to Venezuela, where the oil sector is crumbling from years of mismanagement and the collapse of its economies. Asset seizure by ConocoPhillips is hastening the decline.
OPEC data shows Venezuela production in May at 1.392 million bpd, down from output at 2.072 million bpd in October 2016, the baseline for the OPEC cuts. Venezuela's agreed to production quota is 1.972 million bpd.
Angola is also producing below its allotted quota, while Libya output has dropped sharply this month amid renewed fighting between rival militant groups seeking control of the North African nation.
ICE August Brent fell $1.69 to $73.05 per barrel (bbl) at settlement, a nearly eight-week low on the spot continuation chart, while the September contract declined $1.53 bbl to $72.80.
NYMEX August WTI futures settled 17 cents per bbl lower at $65.54, while the September contract gave back 38 cents to settle at $64.86 bbl.
The spread between WTI crude and Brent crude, a measure of U.S. oil export profitability, narrowed to a $7.51 bbl Brent premium at settlement, a one-month low.
NYMEX July RBOB futures settled down 1.12 cents to $2.0123 gallon, its lowest settlement since April 9, while the August RBOB contracts fell 1.52 cents to $1.9960 gallon.
July ULSD declined 3.7 cents to $2.0701 gallon, its lowest since mid-April, while the August USLD contract settled 3.65 cents lower at $2.0742 gallon, the lowest since April 17.
Brian Whary can be reached at email@example.com
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