Oil Futures End Mixed

Oil Futures End Mixed

WASHINGTON, D.C. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed Tuesday afternoon. Steep production curbs by the Organization of the Petroleum Exporting Countries were countered by an expected acceleration in shale output in the United States, according to a monthly report from the Energy Information Administration released this afternoon.

A weaker U.S. dollar, which fell to a 1-1/2 week low, boosted West Texas Intermediate futures on the session despite higher growth expectations in U.S. production, with the Brent contract down marginally. NYMEX oil products eased Tuesday, with the oil contracts backing off three-month highs after testing overhead resistance.

The EIA in its Drilling Productivity Report released Tuesday projected tight shale oil production in seven key U.S. producing regions will average 8.398 million bpd in March, up 84,000 bpd or 1.0% from February. The monthly increase is at a faster pace than the 62,000 bpd growth rate projected for this month, with EIA's estimated output for February at 8.314 million bpd, also above the government's projection that production this month would be 8.179 million bpd.

In its monthly report, EIA projects oil production in the Permian Region will increase by 43,000 bpd or 1.1% to an average 4.024 million bpd in March, again leading the growth rate. EIA also pointed to ongoing improvement in drilling activity, expecting oil production per new drilling rig in the seven key production regions will rise from an average of 656 bpd in February to 661 bpd in March. The improvement is slower in the Permian, seen up 5 bpd to 603 bpd in March. Drilled but uncompleted wells increased by 207 from December to 8,798 in January, with DUCs in the Permian Region up 205 at 4,170.

Against the backdrop, investors remained focused on a strong start to a six-month production cut agreement between OPEC and 10 non-OPEC oil producing nations led by Russia to remove 1.2 million bpd from the global market. International Energy Agency reported last week that OPEC's production dropped to a nearly four-year low at 30.83 million bpd in January, with Saudi's output currently at 10.213 million bpd against a 10.311 million bpd compliance level. Last week, Saudi Energy Minister Khalid al-Falih said the kingdom output for March would decline to 9.8 million bpd, a steep 1.3 million bpd lower than production rate in November of last year. According to oil market analyst, Vandana Hari, founder of Vanda Insights, Saudi Arabia is overtightening the market as a result of cutting deeper than originally pledged.

In other news, trade talks between the United States and China moved from Beijing to Washington this week, fueling investors' hopes that the two sides can continue making progress toward a deal. U.S. President Donald Trump tweeted on Sunday about the trade talks, saying, "Big progress being made on so many different fronts," while China's President Xi Jinping also expressed cautious optimism on reaching a trade agreement.

U.S. duties on $200 billion in imports from China are set to rise to 25% from 10% if a trade deal is not reached by March 1. Trump said he would delay the tariff increase by 60 days if progress was being made in the trade discussions.

On Tuesday, NYMEX WTI March futures settled up $0.50 at $56.09 bbl, with the April contract settling up $0.47 at $56.45. ICE April Brent futures settled down $0.05 at $66.45 bbl, with the May contract settling down $0.03 at $66.47 bbl. NYMEX RBOB March futures settled down $0.0091 at $1.5638 gallon, with the April settling down $0.0023 at $1.7359 gallon. ULSD March futures settled down $0.0257 at $1.9946 gallon, with the April settling down $0.0207 at $1.9960 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com