CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent crude registered modest gains Monday after testing last week's multi-month lows. The market's bearish psychology was firmly intact ahead of the Dec. 6 Organization of the Petroleum Exporting Countries biannual meeting in Vienna.
OPEC will meet with their non-OPEC oil producing partners led by Russia, and are expected to discuss a proposal reducing their production by as much as 1.4 million barrels per day (bpd), which has buoyed the market. Saudi Arabia has already announced it will cut output by 500,000 bpd in December. While this news should rally oil prices, Russia has urged caution, indicating earlier this month that the global oil market is in balance, so an agreement to cut output in 2019 might not be reached.
Global oil demand is cyclically weak in the first quarter following peak demand during the fourth quarter, with OPEC projecting a 1.0 million bpd drop in demand in the first quarter 2019 from the current quarter. The cyclical weakness is exacerbated by concern over slowing economic growth in 2019 that has also weighed on oil prices. Major equity indices are again sliding, with technology companies under heavy selling pressure. The Dow Jones Industrial Average was down more than 400 points in late afternoon trading. The U.S. dollar weakened to a one-week low.
Strong travel during the Thanksgiving Day holiday should lend upside price support for RBOB futures, although gasoline stocks are above normal and are currently 16.2 million barrels (bbl) or 7.7% above year ago.
Below normal levels of distillate stocks, last tallied 10.44 million bbl above the five-year average, does lend price support for ULSD futures. Days of forward distillate fuel supply at 27.4 is a six-month low.
ULSD futures led Monday's advance boosted by expected healthy demand in December. The National Oceanic and Atmospheric Administration Climate Prediction Center is calling for below-normal temperatures in the Northeast during the first half of December, although forecasters were uncertain over the extended temperature outlook through the end of February.
NYMEX December West Texas Intermediate futures expired up $0.30 at $56.76 bbl with the January contract ending at a $0.44 premium to the now expired contract. ICE January Brent crude settled flat, up $0.03 at $66.79 bbl.
NYMEX December ULSD futures settled 1.27 cents higher at $2.0864 gallon, and the December RBOB contract settled at $1.5829 gallon, up 0.59 cent.
Brian L. Milne can be reached at firstname.lastname@example.org
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