WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved mixed in early trade, retreating from overnight gains after the Organization of the Petroleum Exporting Countries indicated limits on oil production for the full year, while geopolitical tensions continue to support prices.
Near 9 a.m. ET, Nymex June West Texas Intermediate futures were down $0.25 near $62.50 per barrel (bbl) ahead of contract expiration Tuesday afternoon, with the July contract holding a modest $0.15 premium to the expiring contract. ICE July Brent was flat near $72.20 bbl. Nymex June RBOB futures were down 1.5 cents near $2.0320 gallon, with June ULSD futures 1.1 cents lower at $2.0845 gallon.
Oil futures are in retreat early Monday after gaining on news OPEC officials signaled this weekend an extension to the current production cut agreement beyond June. Saudi oil minister said all members back the OPEC accord, as they see the need to drive global crude inventories further down. However, Russian energy minister offered more cautious words about his country's stance towards an agreement, citing ever increasing geopolitical risks in the fragile market.
"Middle East tensions and U.S.-China trade war makes it harder and harder for oil producing nations to stabilize crude prices," said Alexander Novak.
Markets continue to draw support from the risk of military conflict in the Middle East, as tensions between Iran, the United States and Gulf allies escalated sharply last week. U.S. President Donald J. Trump said on Sunday a war between the two countries would mark "the official end of Iran," following a rocket attack on the U.S. Embassy in Iraq, a country where Iran exerts considerable influence. Last week, Saudi Arabia accused Iran of ordering a drone strike on its oil infrastructure, which temporarily halted crude flow through the key cross-country oil pipeline. Saudi Aramco was able to restart operations on the East-West Pipeline, while remaining on high alert for potential terrorist acts in the coming days, according to the company's statement.
Domestically, Baker Hughes reported on Friday the number of active oil rigs in the United States declined for the second straight week to the lowest level since March 2018. The lower rig count correlates with the contraction in domestic crude output, down 100,000 barrels per day (bpd) to 12.1 million bpd last week, government data showed. U.S. oil production reached a record high level of 12.3 million bpd in late April. The rig count is considered an early indicator of future output, as U.S. shale producers cut spending on new drilling, and focus on earnings growth instead of increased output.
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