Oil Slipped From 5-Month High Tuesday

WASHINGTON, D.C. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange slipped from five-month highs Tuesday morning, as markets eye U.S. inventory figures, while Russia signals it may pullout from the Organization of the Petroleum Exporting Countries supply agreement in June.

In midmorning trading, West Texas Intermediate May contract traded $0.16 down to $64.24 per barrel (bbl) after moving into backwardation on Monday, while ICE Brent June futures lost $0.36 to $70.74. Both WTI and Brent settled Monday above their 200-day moving averages. Nymex ULSD May contract was down 0.41 cents to $2.0530 gallon, while RBOB May futures moved 1.61 cents higher to $2.0041 gallon.

Oil futures were lifted overnight to fresh 2019 highs, as geopolitical turmoil in Libya, joined by tightening U.S. sanctions on Venezuela and Iran expanded a security premium on oil prices. The three OPEC members are exempt from the OPEC production agreement, which runs through the end of June. However, Tuesday morning speculations emerged that Saudi Arabia might boost output to offset lost Libyan exports, while reports suggest Russia is ready to pump more to cover the shortfall.

Russia signaled on Monday it wants to relax OPEC quotas in June, citing improving market conditions and falling stockpiles. Senior Russian official said a decision to raise output would not mean the end of the deal, but a confirmation that participants continue their coordinated efforts when it is important not only to cut, but to increase output depending on market conditions. These comments come less than a week after OPEC Secretary General Mohammed Barkindo said OPEC and its allies will continue price boosting policy of production cuts as inventories levels need to drop further despite "improvement in market conditions." The slew of contradictory comments point to potential discourse in reaching an agreement to extend cuts when the group meets in June.

Russia has been a reluctant participant in the OPEC deal, while some major Russian oil companies openly criticized the country's participation in the agreement. Rosneft has long argued that Russia is losing market share to the United States that is not part of the deal. In March, Russian oil output declined to 11.298 million barrels per day (bpd), down by 112,000 bpd from October's level, the baseline for the agreement. Oil production in the United States has soared to 12.2 million bpd last week, a new record high, according to Energy Information Administration estimates.

Recent increases in U.S. crude inventories have also put a lid on price gains. U.S. crude stocks are forecast to have risen by 2.5 million bbl last week, the third straight weekly addition.

The American Petroleum Institute, an industry group, issues its supply report at 4:30 p.m. ET ahead of Wednesday's official figures from EIA.

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