Oil Lower in Friday Morning Trade

WASHINGTON, D.C. (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved lower in early trading on the first session of March, dropping back from new highs after mixed trading Thursday and a midweek rally, weighed down by a continued slowdown in global manufacturing, while broadly supported by production cuts from Organization of the Petroleum Exporting Countries and falling crude imports in the United States.

In late morning trade, Nymex West Texas Intermediate April futures shifted $0.61 lower at $56.61 barrel (bbl), after hitting the highest price point of 2019 at $57.88, while ICE May Brent futures lost $0.95 to $65.36 bbl. ULSD April contract shed $0.0268 gallon to $2.0005, while Nymex RBOB April delivery traded down $0.0156 to $1.7367 gallon.

Investors are reviewing mixed economic data released overnight from China and European Union, detailing ongoing sluggishness in their manufacturing activity in these export driven economies.

The Caixin Manufacturing Purchasing Manager's Index for February rose to 49.9 from 48.3 in January, although held below the 50 mark that divides expansion and contraction for a third month. The Nikkei Manufacturing PMI index fell to 48.9 in February from 50.3 in January. While China's factory activity contracted at a slower pace in February, Germany's manufacturing sector registered the steepest decline in six years, down 2.1 points to 47.6 in February. The Eurozone PMI fell 1.2 points into contraction last month with a 49.3 reading.

Macroeconomic data was also released from the United States Friday morning, which shows the U.S. economy still outperforms its counterparts in Europe and Asia, albeit at a slower pace. The Institute for Supply Management's manufacturing index registered 54.2 in February, a decrease of 2.4 points from January's reading of 56.6 and against expectations for a decline to 55.0. The New Orders Index came at 55.5, a decrease of 2.7 points from January reading of 58.2.

The University of Michigan's Consumer Sentiment Index for February increased to 93.8 in February from 91.2 in January.

Oil futures rallied midweek amid the continued price boosting policy by OPEC cutting 1.2 million barrels per day (bpd) in production to reduce global oil availability, led by deeper-than-expected production cuts from Saudi Arabia. This week Saudi Energy Minister reaffirmed the kingdom's plans to produce 9.8 million bpd in March, 500,000 bpd below an agreed to quota, and suggested the six-month OPEC agreement might be extended through the end of 2019.

Involuntary losses in output from Venezuela, Libya and Iran have further reduced available global oil supply, with the three OPEC countries exempt from the OPEC production agreement. According to Reuters, Venezuelan exports have plunged 40% to around 920,000 bpd since the U.S. government slapped sanctions on its national oil company PDVSA on Jan. 28. Reflecting the tightening global oil market, U.S. crude imports fell to a 23-year low to 5.917 million bpd last week, while domestic commercial crude stocks plunged 8.6 million bbl to a four-week low reported by Energy Information Administration.

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