CRANBURY, N.J. (DTN) -- Oil futures nearest delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange shook off early weakness and moved higher in early trading Monday, with West Texas Intermediate jumping to a fresh four-month high after traders balanced support from production cuts against concern over economic growth.
In midmorning trade, NYMEX April WTI futures were up more than $0.60 at $59.17-per-barrel (bbl) high ahead of the contract's expiration Wednesday afternoon, with the May contract holding a $0.30 premium to the expiring contract. ICE May Brent futures were up nearly $0.35 at $67.50 bbl.
NYMEX April RBOB futures were 1.73 cents higher at $1.8755 gallon, while April ULSD futures eased about 0.25 cent to $1.9655 gallon. The products contracts are following their opposing seasonal tendencies.
Production cuts by the Organization of the Petroleum Exporting Countries, Russia and nine other non-OPEC oil producers have led a rally in oil futures in the first quarter, with both WTI and Brent rallying to four-month highs late last week. This morning, the Joint Ministerial Monitoring Committee said compliance with the 1.2 million barrels per day (bpd) in crude production cuts under the OPEC+ accord reached 90% in February from 83% in January.
JMMC recommended OPEC+ cancel their scheduled meeting in April after members met in Baku, Azerbaijan, over the weekend and affirmed the production agreement would run through the end of June. It was unclear whether the production agreement would be extended beyond June, with reports suggesting Saudi Arabia wants an extension while Russia is balking at the idea. OPEC+ next meets on June 25-26.
Traders are seeking the latest signals showing the global economy's health, with slowing growth having capped the upside in oil futures and equities. Major U.S. equity indices were modestly higher in early trading while the U.S. dollar weakened to a four-day low ahead of the Tuesday-Wednesday Federal Open Market Committee meeting, which will include an update on the economy.
Federal Reserve members are expected to convey that there will be little or no tightening in monetary policy through higher interest rates in 2019. The central bank last lifted the federal funds rate in December to 2.5% sparking an extensive selloff in equities and oil futures.
The loosening in policy follows monetary stimulus efforts by the European Central Bank announced earlier this month to counter sharp slowdowns in the Eurozone's major economies. Beijing also announced efforts to goose growth after acknowledging its economy is slowing, targeting annual gross domestic product growth at 6% this year compared with 6.5% in 2018. Beijing will use cuts in business taxes and fees, easier credit availability and infrastructure spending to reverse the slide. A slowdown in exports from Japan, declining for a third straight month in February, could prompt the Bank of Japan to provide additional stimulus when it meets later this week.
Reports now suggest a trade summit between U.S. President Donald Trump and China's President Xi Jinping might be delayed until June. There had been hope for the two leaders to meet in March, and then April and agree to a bilateral trade agreement. The U.S.-China trade dispute now in effect for more than one year is widely seen to have slowed global trade and the world economy.
Brian L. Milne can be reached at email@example.com
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