Oil Higher in Monday Trade

OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange oil futures closest to delivery and the spot-month Brent crude contract on the Intercontinental Exchange advanced early Monday following Friday's rally sparked by concern over global oil supply availability, with the RBOB contract trading at a fresh two-week high ahead of end-week expirations by oil products futures.

The upside move comes in front of a meeting Monday by the Joint Ministerial Monitoring Committee, which oversees adherence to production agreements by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers including Russia.

"We have this scheduled OPEC Monitoring Committee meeting today and it will be interesting to see if they're still on the same page with regard to production, and we'll see what kind of signals they send out to the markets," said Elaine E. Levine, president of Washington, D.C.-based Powerhouse, a commodity hedge and trade advisory. "I don't expect anything huge to come out of it, because they're basically looking to see who's producing what."

OPEC and non-OPEC agreed in June to loosen production quotas as world oil prices were surging amid a string of outages, including steep decline in Venezuela as the country's economy collapses, and Libya where a struggle continues for control of the North African country. Concern was heightened over the effect U.S. sanctions would have on Iran after the United States pulled out of the Iranian nuclear accord in May, prompting higher output by OPEC in July. OPEC crude production was 32.323 million barrels per day (bpd) in July, a seven-month high.

Last week speaking in Israel, U.S. National Security Advisor John Bolton said sanctions on Iran were already having a greater-than-anticipated effect on the Iranian economy, and said the United States would increase the pressure.

The first round of U.S. sanctions on Iran took effect in early August, with a second and broader round of sanctions that target Iranian oil exports and its banking sector take effect on Nov. 4. Analysts estimate Iran's oil exports were down 700,000 bpd during the first half of August from July. Some expect Iranian oil exports will drop by 1.5 million bpd as sanctions tighten.

"U.S. Federal Reserve chairman Powell was sounding a bit dovish basically saying that there's no need for speed when it comes to rate increases, so we saw some downward movement for the dollar which means lower prices for oil," said Levine.

The U.S. dollar softened to a three-day low in index trading against a basket of currencies, and well below the 13-month high traded on Aug. 15.

Near 9 a.m. ET, Nymex October West Texas Intermediate futures were up fractionally at $68.80 barrel (bbl), holding below Friday's $69.31 two-week high. ICE October Brent futures were up about $0.30 at $76.10, holding below Friday's $76.42 six-week spot high in front of the October contract's expiration at week's end. November Brent is trading at a roughly $0.30 premium to the October contract.

Nymex September RBOB futures were up 1.35 cents at $2.0914 gallon, trading near a fresh two-week high of $2.0941 ahead of its expiration Friday, with the October contract at a 10 cents discount to September delivery.

Nymex September ULSD futures were up 0.6 cents to $2.2082 gallon after trading at a six-week spot high of $2.2175 on Friday, and ahead of its Friday expiration. The October ULSD contract was trading at a roughly 0.5 cents premium to the September contract.

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