Oil Ends Friday Lower Ahead of G-20

WASHINGTON, D.C. (DTN) -- After back-and-forth trade during most of the session, nearest delivered New York Mercantile Exchange oil futures and Brent on the Intercontinental Exchange moved lower during market-on-close trade and accelerated the decline following the expirations of the August Brent, July RBOB and ULSD contracts during the final session of June, the second quarter and first half of 2019. Accelerated losses after the close comes as world leaders meet in Japan for the G-20 Summit Friday and Saturday, and in front of a two-day meeting by the Organization of the Petroleum Exporting Countries, Russia and nine additional non-OPEC oil producers early next week.

NYMEX August West Texas Intermediate settled $0.96 lower at $58.47 barrels (bbl), but gained $4.97 or 9.3% in June on a spot continuous basis following steep losses in May, while up 29% year-to-date. ICE August Brent expired unchanged at $66.55 bbl, with the September contract settling at a $1.81 discount to August at $64.74 bbl. Brent gained 3.2% in June and 23.7% year-to-date.

NYMEX July ULSD futures expired down 0.79 cents at $1.9446 gallon, with the August contract settling at a 0.53 cents discount to the expiring contract. On the month, ULSD futures rallied 5.6% on a spot continuous basis and 15.7% year-to-date. NYMEX July RBOB futures expired 0.41 cents lower at $1.9425 gallon, rolling off the board at a 4.59 cents premium to the August contract.

On a spot continuous basis, RBOB futures surged 7.6% in June and 4.7% on the week, climbing on news Philadelphia Energy Solutions will permanently close the 335,000 barrels per day (bpd) Philadelphia Refining Complex after explosions and fire destroyed multiple units at the facility on June 21. RBOB futures have spiked 61.9 cents or 47% year-to-date.

Friday's lower session comes ahead of a highly anticipated meeting between U.S. President Donald Trump and China's President Xi Jinping, with markets on edge over the outcome as trade tensions between the world's two largest economies have slowed world trade and global economic growth. Markets see their meeting this weekend as an opportunity to bring trade talks between the two countries back on track after negotiations collapsed last month. Both leaders expressed hope for productive talks on Saturday, spurring trade optimism ahead of the meeting. Xi pledged on Friday to further open China's markets and lower tariffs, while calling for a win-win agreement on trade with the United States.

According to wire services, Robert Lighthizer, the top trade negotiator for the United States, met with China's Vice Premier Liu He on Friday to set terms for the meeting between the two presidents.

OPEC will meet Monday (7/1) in Vienna, and will be joined by Russia and non-OPEC producers Tuesday when representatives from the 24 countries will debate an extension of their 1.2 million bpd production agreement into the second half of the year.

Saudi Arabia, OPEC's largest member and de facto leader, said it would maintain production cuts into July regardless of the group's decision. The Saudis have systematically under-produced its allotted 10.311 million bpd quota in a bid to enhance the group's compliance and boost prices. However, Russia, the second largest oil producing nation within the coalition, has remained noncommittal about an extension, having suggested a potential easing of the current quotas. Russia has never officially reached its quota of 11.19 million bpd in the past six months, with some Russian companies, notably Rosneft urging the country to quit the deal, rather than lose more market share to U.S. shale producers.

Market participants will pay close attention to the upcoming meeting between Russia's President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman on the sidelines of the G-20 Summit this weekend in hope the two countries can reach common ground ahead of next week's meeting.

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

(BAS)