CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange settled mostly lower Tuesday in ongoing range-bound trade amid little new news affecting oil demand. Traders are awaiting weekly supply data and monthly outlooks that begin midday Wednesday before adjusting course.
Weekly data from the American Petroleum Institute and Energy Information Administration are delayed a day by Monday's federal holiday in observance of Veterans Day, with EIA to provide an update to its short-term outlook midday Wednesday.
At settlement, NYMEX December West Texas Intermediate futures settled flat, down $0.06 at $56.80 per barrel (bbl) ahead of Friday's expiration of September WTI options, with the January contract settling at $56.85 bbl. ICE January Brent futures ended the session with a $0.12 decline at $62.06 bbl.
Trade in the diesel contract was more volatile, with December ULSD futures settling lower for a fifth straight session, falling 1.66 cents to a $1.8976-per-gallon 1-1/2-week low on the spot continuous chart. December RBOB futures settled up 0.45 cent at $1.6144 gallon after inside trade.
In a speech at the Economic Club in New York Tuesday, U.S. President Donald Trump reiterated that the United States remains close to signing a "phase one" trade deal with China but repeated the deal would only be agreed to if it was good for the country and U.S. workers, according to Reuters.
The crude contracts rallied to six-week highs last week on reports out of China that the two sides agreed to a "phase one" trade deal that included a synchronized roll back of tariffs. By week's end, Trump said he did not agree to a tariff rollback, sparking selling, and returning markets back to range-bound trade.
Markets remained hemmed in by the uncertainty over the trade negotiations, with an agreement seen sparking an extended rally in commodities and equities on the prospect of improved export trade. The more-than-yearlong trade war between the world's two largest economies, along with trade spats elsewhere globally, is blamed for slowing economic growth globally that has dampened demand for oil. Both the United States and China have experienced slowing economic growth since tariffs were slapped on each other's imports, with export-driven Germany teetering on recession. Germany will release its third quarter gross domestic product estimate Thursday morning.
Oil futures were also pressured at the outset of this week by third party reports that oil production by the Organization of the Petroleum Exporting Countries moved off a decade low output rate in October, with Iraq and Nigeria continuing to produce above their quotas outlined in the OPEC+ agreement. A jump in crude production in Saudi Arabia also pushed OPEC output up, with the Kingdom's production having recovered from the mid-September attack on its main crude processing facility.
Saudi Arabia, according to Reuters, produced 10.3 million barrels per day (bpd) in October after plunging 660,000 bpd in September to 9.13 million bpd due to the attack. Of that total, 9.89 million bpd was shipped to market, holding below its allotted quota of 10.311 million bpd, with the rest of the supply moved into inventory. Saudis drew down oil inventory in the wake of the attack to ensure it met customer requirements.
The third-party estimates are followed with Thursday's Monthly Oil Market Report from OPEC that will include production rates by cartel members.
The big jump in OPEC production in October comes in front of the early December gathering of OPEC and non-OPEC members partnered in an OPEC+ in Vienna. Oman's representative has already said the meeting will focus on members adhering to current quotas and not making deeper production cuts.
An improving demand picture for oil and slowing U.S. shale production were noted in maintaining the existing accord through first quarter 2020.
U.S. shale production growth, while holding at a record-high 12.6 million bpd, is seen slowing as investors have grown tired of the money burn, limiting investment into the once hot sector. Mike Sabella, research analyst with Bank of America Merrill Lynch, sizes up the transition in a research note this morning under the title "painful reset for US Shale activity as industry matures."
"The structural shift in US E&P spending habits is forcing a major reset for U.S. land activity, where the [horizontal] rig count is now down 238 rigs from the peak. 2019 will likely be the first year since the U.S. shale revolution started a decade ago that the industry won't outspend cashflow. At some point reduced spending levels are going to have negative implications for US shale oil growth."
Brian L. Milne can be reached at firstname.lastname@example.org
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