Oil Futures Gain on OPEC Cuts

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivered oil futures and the Brent contract on the Intercontinental Exchange shifted higher Friday morning, with both West Texas Intermediate and Brent heading for weekly gains amid ongoing supply cuts by the Organization of the Petroleum Exporting Countries, while investors wrap up first quarter business.

NYMEX May WTI futures gained $0.61 to $59.91 per barrel (bbl), while ICE May Brent advanced $0.62 to trade at $68.44 bbl ahead of contract expiration at Fridays close. Both WTI and Brent traded at fresh monthly highs at $60.73 and $68.89 bbl, with the Brent market in backwardation.

NYMEX April ULSD futures edged 0.23 cent higher at $1.9743 gallon. NYMEX April RBOB futures reversed two days with losses, trading 1.53 cents higher to $1.8952 gallon. NYMEX April products are set to expire at Friday's close.

Friday morning, the University of Michigan's index of consumer confidence in the United States reversed sharply higher to 98.4 from last month's 93.8, against expectations for a further decline. The fresh figures are above the average of 97.2 recorded in the past 26 months.

The bullish sentiment in consumer confidence comes a day after the downgrade in the U.S. economic growth by Department of Commerce. Federal government released their estimate Thursday that showed the U.S. economy grew at a slower pace than previously expected in the final quarter on 2018. Gross domestic product grew at 2.2%, sharply down from 3.4% reported for the third quarter, according to the Department of Commerce. Despite weak government data, some analysts suggest that most investors already priced in the slowdown.

U.S. equities continued higher in the final business day of the first quarter, as investors weighed whether renewed concerns over the economy would result in a long-term downturn for the markets. Dow Jones Industrial Average climbed 126 points to 25,843 after flipping between losses and gains in the previous session, while S&P 500 Index advanced 0.43% in midmorning trading. The two major indexes are mildly higher on the week, while firmly on pace to gain at least 10% in the first quarter.

On Thursday, U.S. President Donald Trump renewed his push for OPEC to lower oil prices, causing a short-lived blip in market sentiment. Despite heated rhetoric, Trump Administration and OPEC have reportedly opened a rare dialogue concerning the stability of oil markets amid U.S. sanctions against two of the cartel's members, according to Wall Street Journal.

WSJ reported senior U.S. energy officials met with OPEC Secretary-General Mohammad Barkindo earlier this month to press for potential dismissal of the current OPEC President, Venezuelan Oil Minister Manuel Quevedo, who is a loyalist to President Nicolas Maduro. White House is pursuing the policy of maximum pressure on Venezuelan regime, while seeking to limit the impact of sanctions on the global oil markets, according to the report.

Separately, analysts are unsure whether Trump administration will extend waivers to buyers of Iranian crude. The exemptions to U.S. sanctions were granted last November and run through April, so extending them could keep oil on the market, while ending the waivers could tighten supply even more.

As OPEC+ production cuts agreement is nearly halfway through its six-month term, International Energy Agency projects a 500,000 barrel-per-day (bpd) global supply deficit in the second quarter. IEA forecasts global oil demand will average 100.4 million bpd in the second quarter, up 800,000 bpd from the first quarter when the consumption rate is weakest. World oil consumption is expected at 100.6 million bpd for 2019, peaking in the third quarter at 101.3 million bpd.

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