CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were mostly higher in early trading Wednesday following Tuesday's mostly down day, with the upside spurred by reports suggesting Russia and Saudi Arabia are discussing reducing oil production in 2019, which follows steep losses by global and U.S. crude futures.
On Tuesday, Nymex West Texas Intermediate futures hit bear-market territory, sliding 20% from the Oct. 3 $76.90 four-year high to $61.31 Tuesday, a seven-month low. During the same period, Brent crude dropped 18% from $86.74, also a four-year high, to an 11-week low Tuesday at $71.18.
Oil futures have sold off so far in the fourth quarter on a wave of new supply, which prompted the Energy Information Administration to revise higher world oil production for this year up 1.22 million barrels per day (bpd) to 100.09 million bpd in their Short-term Energy Outlook released Tuesday from one month earlier. Part of the revised increase was an EIA reassessment of U.S. crude output, prompting a 400,000 bpd adjustment to the outlook for domestic crude production to 11.4 million bpd.
Meanwhile, the International Energy Agency expects world oil demand to drop from a record high 100.2 million bpd in the current fourth quarter to 98.9 million bpd in the cyclically weak first quarter of next year.
Speculation that Russia and Saudi Arabia are discussing production cuts for 2019 align with recent dialogue by the two oil producers that they would look to maintain an alliance between the Organization of the Petroleum Exporting Countries and non-OPEC oil producers beyond the expiration of the two-year Vienna agreement which expires at year's end.
Russia's TASS news agency quoted Russian Energy Minister Alexander Novak as saying, "There is no position yet," and that "the market is in the stage of a good balance."
The news emerged ahead of the Joint Ministerial Monitoring Committee meeting set for Nov. 11 in Abu Dhabi, when representatives from OPEC and 10 non-OPEC oil producers including Russia convene to discuss the current agreement and market fundamentals.
Separately, Iran's oil minister, Bijan Zangeneh, blasted JMMC in a letter to OPEC Secretary General HE Mohammad Sanusi Barkindo, writing that the JMMC is biased against Iran, and does not serve in the "collective interests" of OPEC. Zangeneh wrote that some committee members "have clearly taken side with the U.S. in imposing its unilateral and unlawful sanctions against Iran," according to the Shana news agency. The letter follows Monday's re-imposition of U.S. sanctions on Iranian oil exports.
In the United States, the EIA will publish oil data for the week ended Nov. 2 at 10:30 a.m. ET, which follows mostly bearish statistics from the American Petroleum Institute reported late Tuesday. API reported a large 7.831 million barrel (bbl) build in U.S. commercial crude supply for the week profiled, and that gasoline inventories fell 1.195 million bbl and distillate supply slid 3.638 million bbl.
The Federal Open Market Committee begins their two-day meeting on monetary policy today, with central bank officials not expected to lift interest rates. The U.S. dollar was trading at a two-week low Wednesday morning.
In early trading, Nymex December WTI futures were slightly higher near $62.35 bbl, down from a $63.18 intraday high, with ICE January Brent up $0.30 near $72.45 bbl. Nymex December RBOB futures were down 1.0 cents near $1.6835 gallon, with December ULSD futures up 2.5 cents near $2.2135 gallon.
Forecasts for below normal temperatures in the U.S. Northeast is underpinning a rallying ULSD contract, with the National Oceanic Atmospheric Administration's Climate Prediction Center calling for below normal temperatures in the Northeast from Nov. 12-20. The largest concentration of homes and small business using heating oil for their space heating needs across the globe are in the Northeast.
Brian L. Milne can be reached at email@example.com
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