Oil Futures Halt Declines

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Intercontinental Exchange Brent settled higher Thursday, lifted by surging equities and indications Organization of the Petroleum Exporting Countries would further deepen production cuts to balance the oil market against weakening global demand.

NYMEX September West Texas Intermediate futures gained $1.45 to $52.54 barrel (bbl) settlement, while the ICE October Brent contract advanced $1.15 to end Thursday at $57.38 bbl.

NYMEX September ULSD futures ended 2.34 cents higher at $1.7766 gallon, rebounding from the seven-month low settlement a day ago. The September RBOB contract settled 2.54 cents higher at $1.6457 gallon, adding nearly 2% on a session.

Following three consecutive sessions of losses, oil contracts managed to stage an impressive recovery Thursday afternoon, with both crude benchmarks gaining more than 2% by the market's close. Thursday's gains came after reports emerged that Saudi Arabia approached OPEC producers to formulate policy in response to the latest sell-off in the oil complex. Afternoon news also indicated Saudi Arabia plans to cut crude exports by 700,000 barrels per day (bpd) in September, while significantly reducing production in the coming months. Saudi officials have repeatedly said lower oil prices are unacceptable for the Kingdom and they would do whatever it takes to keep the market balanced. Riyadh has consistently over-complied with its quota under OPEC+ agreement and analysts believe Saudi Arabia is willing to cut more supply from the global market to support prices.

Market concerns over decelerating global oil demand were intensified by weekly oil supply data from the U.S. Energy Information Administration Wednesday morning that showed U.S. crude exports tumbled 780,000 in the week ended Aug. 2 to 1.875 million bpd, a 10-month low. According to EIA data, outbound crude flows from the U.S. have been steadily declining since hitting a record high of 3.3 million bpd in June, due partially to tighter WTI-Brent differentials and diminished exports to Asia. While domestic production is booming and more infrastructure is brought online to bring shale oil to the global markets, the question now being asked is whether there is enough demand for U.S. crude amid rising trade barriers and slowing global growth.

The International Energy Agency will release its latest update on global oil demand and supply fundamentals in its Monthly Oil Market Report due out Friday, Aug. 9. The Paris-based energy watchdog is widely expected to cut its global demand forecast and IEA Director Fatih Birol last month signaled the agency would revise lower global oil consumption by 100,000 barrels in 2019. However, the latest flare-up in global trade tensions this week could prompt the agency to downgrade its demand forecasts even further, potentially exerting more pressure on crude contacts at the end of the week.

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

(BAS)