Oil Trading Lower on Monday

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent crude were mostly lower in early trading Monday following Friday's sell-off triggered after U.S. President Donald Trump told the Organization of the Petroleum Exporting Countries to pump more oil to press crude prices down.

In early trading, Nymex June West Texas Intermediate futures were down $0.15 at $63.15 per barrel (bbl). ICE June Brent was down $0.20 at $71.95, with the July contract trading at a $0.50 discount to June delivery. Nymex May RBOB futures were down 1.4 cents near $2.0865 gallon, trading at a roughly 5cts premium to the June contract. May ULSD futures were up 0.2 cents near $2.0530 gallon, with the June contract near parity with May delivery.

ICE June Brent, and Nymex May RBOB and ULSD contracts expire at Tuesday's closing bell.

WTI and Brent surged to nearly six-month highs last week, rallying after the U.S. State Department unexpectedly announced there would be no waivers granted to allow certain countries to continue purchasing U.S. sanctioned Iranian oil. U.S. sanctions on Iran's oil exports took effect in early November, with eight jurisdictions granted 180 day waivers, which expire Thursday.

U.S. Secretary of State Mike Pompeo said the United States is applying maximum pressure on Tehran to force a change in its military adventurism, with the United States seeking to press Iran's oil exports to zero. Iran's crude exports are currently estimated at about 1.1 million barrels per day (bpd). The Trump administration indicated Saudi Arabia and United Arab Emirates would make up the shortfall.

Speaking in Beijing, Russian President Vladimir Putin said on Saturday he was unaware of a Saudi commitment to boost oil production to offset lost Iranian oil, according to Reuters. Putin pointed to the OPEC agreement in which OPEC, Russia and nine additional non-OPEC countries agreed to cut production through the end of June noting the accord is still in effect.

Brent crude was given a further boost on news refiners in Germany and Poland halted deliveries of Russian oil due to contamination effecting about 700,000 bpd of oil from a key pipeline. Russia plans to ship clean fuel Monday, and expects to have the issue resolved by May 7.

Trade talks between the United States and China resume this week in Beijing before returning to Washington, D.C. next week, with comments from the Trump administration regarding an agreement cautious. Agreeing to enforcement terms appear to be a sticking point.

Trump administration officials indicated they have leverage in the discussions as the U.S. economy remains strong, with first quarter gross domestic product growing at an annualized 3.2% rate that was as much as 1% above expectations. Low inflation despite robust growth is seen as a strong foundation for the expansion to continue, with the Federal Reserve seen holding interest rates unchanged this year.

The Federal Open Market Committee begins a two-day monetary policy meeting Tuesday. The U.S. dollar is stronger in early index trading, but is holding below Friday's 98.085 two-year high triggered by Friday's GDP data.

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

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Brian Milne