Oil Drops Back From Highs

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange retreated from last week's three-month highs in opening week trading, with Nymex West Texas Intermediate and products sliding to three-day lows and the Brent contract a 1-1/2 week low, although the uptrend remains intact.

Goldman Sachs in a note to investors expects Brent crude to move into a $70 by $75 barrel (bbl) trade range in the coming weeks, although does not expect the international price benchmark for crude to be sustained at that price level.

The investment bank expects the global oil market to be very tight in March and April amid deep production cuts by the Organization of the Petroleum Exporting Countries, namely Saudi Arabia which has set output for March 500,000 barrels per day (bpd) below the 10.311 million bpd output rate it is allotted under the OEPC agreement reached in December.

U.S. President Donald Trump tweeted Monday morning, "Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike -- fragile!"

Goldman Sachs estimates exports from Venezuela have dropped by about 100,000 bpd since U.S. sanctions were announced in late January, and that figure could decline by another 200,000 bpd to 300,000 bpd if a political solution is not found soon in the OPEC nation.

Juan Guaido, Venezuela's interim president and recognized by more than 50 countries as the country's legitimate leader, led a massive humanitarian aid effort over the weekend, with reports of more than 300,000 volunteers attempting to bring in food and medicine from Columbia and Brazil. They were blocked by the military still loyal to Nicolas Maduro, with at least two people confirmed killed and hundreds injured. More than 100 military officers are reported to have defected to Guaido over the weekend.

The failed effort in bringing in food and medicine to the collapsing country, where inflation is running at two million percent, has prompted the opposition for the first time to call upon allies to take up military action to dislodge Maduro. U.S. Vice President Mike Pence will meet with leaders from Latin America in Columbia this week.

"I will be delaying the U.S. increase in tariffs now scheduled for March 1," Trump tweeted last weekend, referring to a 15% hike to 25% in tariffs on $200 billion in Chinese imports set to take effect on Saturday, March 2.

U.S. and Chinese representatives extended trade discussions in Washington through the weekend, with a U.S. delegation scheduled to leave for Beijing Monday afternoon.

"Assuming both sides make additional progress, we will be planning a summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement," Trump tweeted. "A very good weekend for U.S. & China!"

Nymex March RBOB and ULSD options and ICE April Brent options expire at Monday's closing bell, with the futures contracts set for expiration Thursday afternoon.

In early trading, Nymex WTI April futures were down $0.95 at $56.31 bbl, with the ICE Brent April contract down $1.20 at $65.92. May Brent was holding a $0.15 bbl premium to April delivery. Nymex RBOB March futures were down $0.0289 at $1.5823 gallon, with the April contract trading at a $0.16 premium to the expiring contract, reflecting the seasonal transition into spring. ULSD March futures were down $0.0240 at $2.0071 gallon, holding a $0.0035 gallon premium to April delivery.

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

(BAS)

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