Oil Futures Down on OPEC Output Gain

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange trimmed declines in afternoon trade Monday but still settled the session lower amid mounting uncertainty over progress in U.S.-China trade talks. An unexpected rebound in crude production from the Organization of the Petroleum Exporting Countries also weighed on the complex.

The U.S. dollar eased from a three-week high to 98.033 in afternoon index trade, offering some support for the U.S. crude oil contract.

NYMEX December West Texas Intermediate futures settled down $0.38 at $56.86 per barrel (bbl) and ICE January Brent dipped $0.33 to a $62.18 bbl. Both benchmarks remain range-bound at the start of the new trading week.

NYMEX December RBOB dropped 2.38 cents to $1.6099 gallon and NYMEX December ULSD contract slipped 0.39 cent to end the session at a $1.9142-per-gallon better-than-one-week low settlement on the spot continuous chart.

Monday afternoon, markets continued to focus on trade-related headlines that whipsawed prices last week. U.S. President Donald Trump previously overturned reports that the United States and China agreed to gradually reduce tariffs on each other's imports, dashing hopes that both sides are nearing the conclusion of a yearlong trade spat.

"Their supply chain is all broken like an egg" said Trump, referring to the state of a trade war between the world's two largest economies.

Beijing, which previously expressed optimism about removing the duties, has turned silent.

Separately, OPEC's crude output rebounded from a decade low in October, driven by production increases from Saudi Arabia and continued undercompliance with OPEC+ quotas by key members of the cartel. According to the private survey, Saudi Arabia is now producing above 9.8 million barrels per day (bpd) -- the same level as before the Sept. 14 attack on its key oil infrastructure that shut in half of the kingdom's output. Iraq -- the second-largest producer within the cartel -- overproduced by 250,000 bpd in October against its pledged quota, while Nigeria missed its quota by some 140,000 bpd last month.

Venezuela, the United Arab Emirates and Libya also increased crude output in October, contributing to the group's higher production rate.

Markets now await official supply data from OPEC's Monthly Oil Market Report due on Thursday. On Wednesday, U.S. Energy Information Administration will release its Short-term Energy Outlook, and on Friday, the International Energy Agency releases its forward outlook on the oil market's disposition.

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


Liubov Georges