Crude Futures Fade from Highs Tuesday

CRANBURY, N.J. (DTN) -- Nearest delivered New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange faded from five-month or better highs to settle mixed, with the gasoline contract up for a third session ending at a six-month high.

West Texas Intermediate and Brent faded from a new round of highs after Moscow cast uncertainty that production cuts by Russia, the Organization of the Petroleum Exporting Countries and nine other non-OPEC producers would continue in its current form, while Venezuela restarted two of four crude upgraders shut by massive blackouts, and the Energy Information Administration revised higher its outlook for U.S. crude oil production.

In its short-term Energy Outlook released this afternoon, EIA projected U.S. crude production would average 12.4 million bpd this year and 13.1 million barrels per day (bpd) in 2020, with both projections revised up 100,000 bpd from their outlook in March. EIA last week reported U.S. crude production for the week-ended March 29 at a 12.2 million bpd record high.

Citing improving market conditions and drawdowns in global oil inventory, Russia on Monday suggested a six-month OPEC+ agreement might continue beyond the June 30 term in a different form, with production increasing against the 1.2 million bpd in cuts. The suggestion comes on the heels of an escalation in violence in Libya that could push the OPEC member into a full-blown civil war and sharply reduce crude exports from the North African nation.

Lower crude values come ahead of weekly supply data from the American Petroleum Institute this afternoon and EIA Wednesday morning, with expectations commercial crude stocks in the United States increased 2.5 million barrels (bbl) during the first week of the second quarter. Gasoline inventory is estimated to have declined 2 million bbl and distillate fuel stocks to have been drawn down 1.15 million bbl during the week profiled.

Nymex May WTI futures settled down $0.42 at $63.98 bbl, reversing off a $64.79 bbl better-than five-month high on the spot continuous chart. ICE June Brent ended the session down $0.49 at $70.61 bbl, retreating from a $71.34 five-month spot high.

Nymex May ULSD futures reversed off a test of resistance at the $2.0645 200-day moving average, trading at a $2.0648 nearly five-month spot high to settle down 1.22cts at $2.0449 gallon.

Nymex may RBOB futures bucked the trend, settling up 1.1cts and just under the psychological $2 barrier at $1.9990 gallon. The spot-month contract reached a $2.0077 six-month high Tuesday.

Brian Milne can be reached at Brian.Milne@dtn.com

(BAS)