Oil Futures End Mixed

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent crude settled mixed on the session and the week, with the gasoline contract higher on the day and up 3.1% from prior Friday while ULSD futures settled at a one-month low.

NYMEX April West Texas Intermediate reversed down from a fresh four-month high on the spot continuation chart at $58.95 bbl ahead of the afternoon expiration of April options, while rallying 4.4% on the week following an unexpected weekly drawdown in commercial crude stocks reported midweek and a 130,000 bpd downward revision in projected domestic crude production for this year to 12.3 million bpd. The Energy Information Administration also reported a 100,000 bpd drop in U.S. crude output to 12.0 million bpd for the first week of March, while Baker Hughes this afternoon reported the fourth consecutive weekly decline in the U.S. oil rig count to a nearly 11-month low at 833. The U.S. oil-rig count is down 24 over the past four weeks.

The International Energy Agency this morning said it sees a 500,000 bpd global supply deficit in the second quarter following a modest surplus in the first quarter on robust demand and production cuts by the Organization of the Petroleum Exporting Countries, Russia and nine non-OPEC oil producers. The six-month OPEC+ agreement runs through the end of June, in which producers are to cut their output a collective 1.2 million bpd from September or October 2018 rates, depending on the country. Saudi Arabia this week suggested the output agreement could be extended beyond June.

The Paris-based agency said they expected the second quarter supply deficit ahead of this week's better-than-weeklong power disruption in Venezuela, which has had a serious effect on oil operations, while a current fix to the issue remains suspect. IEA said theoretically Saudi Arabia could make up for the supply shortfall from Venezuela, as the supply cuts have widened the kingdom's spare capacity.

On Thursday, OPEC cited secondary sources in reporting Venezuelan crude production declined 142,000 bpd to 1.008 million bpd in February, accounting for the majority of a 221,000 bpd slide in OPEC output to a 30.549 million bpd four-year low. Reuters on Friday reported Elliott Abrams, the U.S. special representative for Venezuela, said Venezuelan crude production has been declining steadily by about 50,000 bpd per month, and expects output to fall below 1.0 million bpd in a month or two. Abrams said the extended blackouts in recent days crippled the country and caused lost crude output.

While the crude contracts backed off four-month highs Friday, they are in position to break higher as the market tightens and oil demand continues to be projected at robust levels for 2019 despite a global economic slowdown. The IEA maintained its outlook for a 1.4 million bpd year-on-year growth rate in world oil consumption to 100.6 million bpd for 2019 even as the agency sees slowing demand from China.

Overnight, China state media said Washington and Beijing were making "concrete progress" in their trade negotiations, bolstering equities after markets were pressured by talk of a delay in reaching a bilateral trade agreement to at least late April.

NYMEX April WTI futures settled down $0.09 at $58.52 bbl on the session yet rallied $2.45 on the week, with ICE May Brent down $0.07 on the day at $67.16 bbl, although is up $1.42 since prior Friday. Brent's premium to WTI narrowed this week to an $8.64 bbl 5-1/2 week low.

NYMEX April ULSD futures were the complex's laggard, settling down 1.72cts on the session and 3.21cts on the week to $1.9677 gallon as strong demand growth against year ago slows and following a weekly build last week despite ongoing seasonal refinery maintenance.

The slowing growth in distillate demand coincides with sluggish industrial output, with the Federal Reserve this morning reporting industrial production in the United States edged up a less-than-expected 0.1% in February while manufacturing contracted for a second straight month, down 0.4%.

NYMEX April RBOB futures edged up 0.82cts to $1.8577 gallon while gaining 5.6cts on the week, with the advance in line with the gasoline market's seasonal characteristic. An optimistic consumer also bodes well for gasoline demand, with the preliminary March Consumer Sentiment Index reported at a greater-than-expected 97.8 according to the University of Michigan's survey.

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