CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and Intercontinental Exchange Brent crude settled mixed after a second session consolidating within Tuesday's wide trade range. The market remains tentative on worries over oil demand spurred by slowing world economic growth and building crude inventory amid record high U.S. production.
Oil statistics released late morning by the Energy Information Administration for the first full week of November received a shrug by the market, which was price supportive for oil products but bearish for crude. Interestingly, West Texas Intermediate and Brent crude settled higher while ULSD and RBOB futures registered losses. Further illustrating the market's disinterest with Thursday's weekly supply report, ULSD futures posted the biggest loss despite bullish data for distillates.
Oil refineries are slowly emerging from seasonal maintenance programs, which will boost demand for crude while lifting product yield. However, weak crack spreads for gasoline will certainly dull enthusiasm, with the RBOB spread against Brent hovering just above $9 bbl, a more than three-year low, while negative against WTI since late October. In contrast, ULSD futures are trading at a more than $30 bbl premium to Brent, a nearly 45-month high, and above $20 bbl against WTI futures.
Thursday's price performance shows the markets' focus are on broader trends, namely has a bottom been installed after Tuesday's rout? The suggestion is, maybe not.
A loss of confidence in the ability of the Organization of the Petroleum Exporting Countries to direct global oil prices appears to underpin the bearish sentiment even with support from Russian President Vladimir Putin, who suggested Russia would cooperate with OPEC in lowering output.
Over the weekend, Saudi Arabia said it would cut crude production by 500,000 bpd in December, and OPEC has signaled members are considering a 1.4 million bpd production cut in 2019. Too little, too late it seems, with the global oil market restocking at a rapid pace despite U.S. sanctions on Iranian oil exports. The Trump administration's issuance of 180-day waivers allowing eight countries to continue buying Iran's oil and tweets scolding OPEC and the Saudis for contemplating production cuts appear to have not only assured the bull market is dead, but dragged the bull behind a chariot like Hector. Of course, market conditions are transitory.
NYMEX December WTI futures settled up $0.21 at $56.46 bbl ahead of expiration at Monday's (11/19) close, with January delivery ending at a $0.22 premium. ICE January Brent settled up $0.50 at $66.62 bbl.
NYMEX December ULSD futures settled down 2.18cts at $2.0741 gallon, with December RBOB futures edging 0.4cts down to $1.5566 gallon.
Brian L. Milne can be reached at email@example.com
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