CRANBURY, N.J. (DTN) -- Oil futures and Brent crude were higher in early trading Tuesday following Monday's sell-off triggered by last week's lack of follow-through buying after key resistance points were encountered.
Monday's downside was accelerated by a tweet from U.S. President Donald Trump urging the Organization of the Petroleum Exporting Countries to take it easy, and that the world economy was fragile and could not absorb higher oil prices. Yet, the tweet is not swaying Saudi Arabia as it did in 2018, with the Saudis leading the OPEC effort in cutting oil production to prompt global oil inventory drawdowns and boost oil prices.
Saudi Arabian Energy Minister Khalid al-Falih earlier this month said Saudi crude production would average about 9.8 million barrels per day (bpd) in March, 500,000 bpd below its allotted output rate under the OPEC production agreement reached in December.
Multiple signals show world oil supply will be tight during the first half of 2019, which coincides with the six-month OPEC pact, further aided by lower output in Libya due to warring factions that have forced offline the North African nation's largest oil field. U.S. sanctions have also pressed lower oil exports from Iran and Venezuela, with all three countries exempt from the OPEC agreement.
Reports out Tuesday suggest the United States will try to further isolate Iran after the abrupt resignation of Iran's foreign minister, Mohammad Javad Zarif, late Monday, a moderate and skilled diplomat who forged the 2015 nuclear accord with former U.S. Secretary of State John Kerry. The resignation is a victory for the Islamic Republic's hardliners.
U.S. Vice President Mike Pence again showed support for Venezuelan interim president Juan Guaido, meeting with Latin American leaders in Columbia on Monday, with the goal of pushing out Nicolas Maduro. Violence is rapidly increasing along Venezuela's border as Maduro is reported to have unleashed thugs to beat protestors opposed to his leadership after he was sworn into a second term as president in January following fraudulent elections.
Goldman Sachs on Monday said they expected significant tightening in the world oil market in March and April, while the Energy Information Administration projected 1.3 million bpd draw down in global oil inventory in February.
The advance comes ahead of the Nymex March oil products and ICE April Brent futures contracts Thursday afternoon, while the U.S. dollar was little changed after sliding to a three-week low in overnight trading.
In early trading, Nymex WTI April futures were up $0.19 at $55.67 barrel (bbl), with the ICE Brent April contract up $0.45 at $65.21. May Brent is holding a modest $0.15 premium to the expiring April contract.
Nymex RBOB March futures were up $0.0278 at $1.5730 gallon, while the April contract holds a better than $0.15 gallon premium to the expiring contract, reflecting the preseason rally for the gasoline market. Nymex ULSD March futures were up $0.0222 at $1.9968 gallon, with the April contract at parity.
Brian L. Milne can be reached at email@example.com
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