WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures climbed to fresh four-month highs Thursday morning on supply drawdowns in the United States, while output from Organization of the Petroleum Exporting Countries reached a four-year low, as the group continues to deliver on pledged cuts.
Thursday morning, the OPEC said in their Monthly Oil Market report that its crude production fell 221,000 barrels per day (bpd) in February to 30.549 million bpd, the lowest level since 2015. While OPEC continues to deliver on pledged cuts, the size of February production decrease is 71% lower compared to January cut of 797,000 bpd—the first month the OPEC+ agreement took effect.
Citing secondary sources, Venezuela accounted for majority of the decline with the country's output, down 142,000 bpd to 1.008 million bpd in February. In Saudi Arabia production declined 86,000 bpd in the reviewed month to a 10.087 million bpd, a 10-month low and nearly 213,000 bpd below its required quota under the OPEC+ agreement. As of March, Saudi's energy minister Khalid al-Falih said the kingdom would continue to maintain output well below its required levels, with March and April production set to average 9.8 million bpd. The Saudi minister also indicated the OPEC production cuts could remain in place beyond June.
Oil futures have rallied almost 30% this year as OPEC and its allies have curbed production, while a collapsing oil industry in Venezuela further supported the market.
Overnight, Reuters reported that two storage tanks exploded at a heavy-crude upgrading facility in Venezuela, as the country's main oil terminal resumed shipments after a prolonged power outage. According to Reuters, the tanks were holding diluent, which is mixed with extra-heavy Orinoco belt heavy crude to make it an exportable product.
In the United States, WTI futures continue to draw support from falling inventories and slowing production domestically during the first week of March. Energy Information Administration reported an unexpected 3.9 million barrels (bbl) drawdown in U.S. commercial crude oil stockpiles, while the overall production declined last week by 100,000 bpd from a record high to 12.0 million bpd. On Tuesday, EIA reduced its 2019 outlook for U.S. crude production by 130,000 bpd to 12.3 million bpd from its projection month prior. EIA also reported the fourth consecutive weekly drawdown in gasoline supply during the week-ended March 8, down 4.6 million bbl to a 10-week low at 246.1 million bbl last week.
In late morning trading, West Texas Intermediate edged $0.30 higher to $58.56 bbl, and Brent futures were up $0.04 to $67.59 bbl, with both benchmarks trading at their highest price point this year. ULSD April futures traded down 0.44 cents to $1.9877 gallon, while the April RBOB contract continued its rally to a $1.8822 gallon five-month high on the spot continuous chart, trading near $1.8570 gallon late morning.
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