Oil Futures Slip; US Oil Output to Grow

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Intercontinental Exchange Brent crude edged lower during uneventful trade Monday, dropping back from prior week's five-month or better highs with the market lacking a spark to push the contracts higher.

Major U.S. equity indices eased modestly through Monday afternoon as quarterly earnings roll out and top U.S. officials suggest they are near the final stages in trade negotiations with China. Two phone calls between U.S. and Chinese officials are scheduled for this week.

The U.S. dollar softened, consolidating within Friday's trade range that included a test of support at the 96.348 100-day moving average, but failed to boost West Texas Intermediate futures.

Market followers also note higher oil prices could crimp demand, especially in countries like India, undermining a source of support. The International Energy Agency last week maintained expectation for world oil consumption to grow 1.4 million bpd annually this year, a quicker pace than the 2018 1.3 million bpd year-on-year expansion, but cautioned risks were heavier on the downside.

WTI reached a five-month high at $64.79 bbl and Brent crude at $71.87 bbl last week.

NYMEX May WTI futures slid to a $63.03 six-day low Monday before settling at $63.40 bbl, down $0.49, and ahead of Tuesday afternoon's options expiration. June WTI futures settled at a $0.16 premium to the May contract.

Energy Information Administration this afternoon projected an 80,000 bpd monthly increase in U.S. tight oil production for May, with output from the seven main shale oil basins expected at 8.46 million bpd. Permian Basin output accounts for more than half, 42,000 bpd, of the forecast to 4.136 million bpd. Drilled but uncompleted wells dip four to 8,500 in March, although increases 49 in the Permian.

ICE June Brent crude settled down $0.37 at $71.18 bbl, with the calendar spreads narrowing in the inverted market.

NYMEX May RBOB futures settled down 2.52cts at $2.0018 gallon after trading at a $2.0702 six-month high on the spot continuous chart. NYMEX May ULSD futures eased 0.97cts to $2.0610 gallon, dropping back from Friday's $2.0888 five-month spot high.

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