WTI, Brent Futures Settle Lower

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery traded on the New York Mercantile Exchange and Intercontinental Exchange Brent crude settled lower Friday, with West Texas Intermediate and Brent ending down for the first time in 2019 following nine consecutive daily increases. Oil futures moved into a bull market this week after trading in bearish territory since early November.

Oil futures reversed from new and fresh multi-week highs traded overnight, and declined despite WTI and Brent futures crossing above their $52.64 and $61.44 50-day moving averages, respectively, intraday -- a technical signal frequently spurring buying interest.

Oil futures and equities have chased the other's market, with major U.S. stock indices softer in late trade Friday afternoon amid risk-off trade on concern over the effects of a three-week government shutdown on the domestic economy.

NYMEX February WTI futures settled down $1.00 at $51.59 bbl, reversing off a $53.31 five-week high on the spot continuous chart, while gaining $3.63 or 7.6% on the week. The WTI spot-month contract rallied $10.95 or 25.9% from the 2018 low traded Christmas Eve to Friday's intraday high.

ICE March Brent crude ended down $1.20 at $60.48 bbl after trading at a $62.49 bbl five-week spot high overnight, although rallied $3.42 or 6.0% since prior Friday. The Brent contract on a spot-month basis surged $12.65 bbl or 25.2% from the 2018 low posted the day following Christmas to Friday's intraday high.

NYMEX February ULSD futures settled down 2.64cts at $1.8797 gallon, reversing down from a $1.9235 five-week high on the spot continuous chart, although rallied 11.05cts or 6.2% this week. February RBOB futures settled 3.0cts lower at $1.4007 gallon after trading at a $1.4468 fresh four-week spot high overnight, with the contract gaining 5.29cts or 3.9% from prior Friday.

Despite the lower close, oil futures are positioned to make additional gains in coming sessions amid increasingly bullish sentiment for the world oil market following a very bearish psychology that defined trading for most of the fourth quarter.

Morgan Stanley expects the world oil market to be mostly in balance in 2019 compared with 2018's oversupplied market, the Wall Street Journal reported this morning.

The evolving sentiment follows three notable developments this week, including positive statements by the United States and China at the conclusion of their three-day meeting in Beijing aimed at resolving their trade dispute. This week's meeting between midlevel trade representatives is to be followed by a meeting between senior officials later this month.

The negotiations come on mounting evidence China's economy is weakening fast amid U.S. tariffs on Chinese imports, which are set to expand on March 2 on a throng of items following a 90-day truce agreed to by U.S. President Donald Trump and Chinese President Xi Jinping should an agreement not be reached. Resolving the trade dispute between the world's two largest economies is critical for world economic growth and oil demand in 2019.

The International Energy Agency in December projected annualized global oil demand growth of 1.4 million bpd in 2019, with China to account for about 400,000 bpd of the growth rate. That's a slight slowdown from year-on-year growth of 500,000 bpd in 2018 estimated by IEA.

The market's attitude about the U.S. economy also improved this week, as Federal Reserve Chairman Jerome Powell continued to rectify what is widely seen as a botched news conference in December in which the chairman suggested ongoing monetary tightening would continue this year despite global equity and commodity selloffs in the fourth quarter. Minutes to the December Federal Open Market Committee meeting released Wednesday also worked to ease investor anxiety over the suggested indifference to market signals, with officials embracing a cautious pace in raising interest rates.

Raising interest rates too quickly would slow economic growth in the United States amid higher borrowing costs. The U.S. dollar slumped to a three-month low this week as these concerns eased, lending support to WTI futures since oil trades globally in dollar denominations.

The supply side of the equation was also in play this week, with Saudi Arabia indicating it would reduce crude exports 800,000 bpd from November to February, projecting an export rate of 7.1 million bpd next month. The Saudis also suggested the Organization of the Petroleum Exporting Countries might meet again ahead of their biannual meeting in April to discuss additional production cuts. OPEC+ agreed to 1.2 million bpd in crude output cuts for the first half of 2019.

Trading could be volatile Monday as the UK Parliament is scheduled to vote on an agreement for a British exit from the European Union forged by British Prime Minister Theresa May and EU officials. In June 2016, UK voters voted to leave the union in what is widely referred to as Brexit.

Brian L. Milne can be reached at brian.milne@dtn.com