Oil Futures Flat Monday Morning

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were little changed early Monday following modest declines Friday. Improved market sentiment for economic growth and its knock-on effect for global oil demand offset news of an impending resolution in the neutral zone that would clear the way for resuming 500,000 barrels per day (bpd) of oil production currently sidelined.

Near 8 a.m. EST, NYMEX February West Texas Intermediate was flat near $60.45 per barrel (bbl), with the February Brent contract on ICE up $0.10 near $66.25 bbl. NYMEX January ULSD futures firmed 20 points to near $2.0240 gallon, and the January RBOB contract was little change at $1.7065 gallon.

Oil futures remain near three month highs on their spot continuous charts.

The U.S. dollar is again strengthening in index trade following Friday's advance, reaching a 97.38 11-day high overnight. U.S. equity indexes are set for a higher open this morning, with global equity indexes mixed.

Citing sources familiar with negotiations, Wall Street Journal this morning reports Saudi Arabia and Kuwait are near an agreement to settle their five-year dispute over oil production in an area known as the neutral zone which has output capacity of 500,000 bpd. Production in the neutral zone -- an area shared between the two countries -- was shut in 2014 because of disagreements over land use and environmental permits.

Should an agreement be reached and production restarted, Saudi Arabia and Kuwait would reduce output elsewhere to ensure compliance with a production agreement reached by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers.

Earlier this month, OPEC+ reached an agreement deepening production cuts by 500,000 bpd to 1.7 million bpd through the first quarter 2020, with Saudi Arabia agreeing to voluntarily reduce their output by another 400,000 bpd beyond their quota. The agreement continues to underpin price support for oil futures.

Russian Energy Minister Alexander Novak continued Russia's provocative stance, saying earlier Monday OPEC+ production cuts could be reduced when OPEC+ meets in March to discuss their agreement, according to Reuters. Novak said all options are on the table, while indicating Russian oil production is set to hit a record this year. OPEC projects Russia's oil supply at 11.43 million bpd for 2019 and at 11.5 million bpd in 2020.

Oil futures remained buoyed by news this month Washington and Beijing reached a phase one trade deal that de-escalates a more than year-long trade war between the United States and China, with both countries rolling back some tariffs on imports while Beijing has pledged to increase imports of agricultural and energy products from the United States.

The partial trade agreement between the United States and China lifted optimism for an improvement in world trade flow in global economic growth. Officials have indicated negotiations for a phase two trade deal are underway.

Brian L. Milne can be reached at brian.milne@dtn.com

(CZ)

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