WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved mostly lower on Monday, except for the ICE Brent February contract that expired at a 3-1/2-month spot high. Oil futures are holding near multi-month highs amid optimism over a U.S.-China trade deal and upbeat economic data, while traders also kept a close watch on the Middle East following U.S. air strikes in Iraq and Syria.
U.S. dollar continued its bearish route at the start of the holiday-truncated week, sliding to a five-month low and in position to press below the 95.365 June low on the spot continuous chart. The weaker currency lent WTI futures support.
At settlement, February West Texas Intermediate contract inched $0.04 lower to $61.68 per barrel (bbl), and February Brent expired at $68.44 -- the highest settlement on the spot continuous chart since the Sept. 16 $69.02 settlement.
The widening premium comes ahead of deeper production cuts by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers aligned with the cartel set to take effect Wednesday. On Dec. 6, OPEC+ agreed to deepen their production cuts 500,000 barrels per day (bpd) to 1.7 million bpd for the first quarter 2020.
NYMEX January ULSD futures dipped 0.9 cent to $2.0406 gallon, reversing down from a $2.0749 3-1/2-month high on the spot continuous chart. January ULSD futures expires Tuesday, with the February contract ending at a 32-point premium to the expiring contract. NYMEX January RBOB futures moved down 1.9 cents to a $1.7283-per-gallon settlement ahead of expiration Tuesday, with the February contract ending at a 43-point discount.
While softening on the session, oil futures remain near highs amid bullish optimism over global economic growth in 2020. The Commodity Futures Trading Commission in its holiday-delayed Commitment of Trader's report released Monday afternoon shows noncommercial traders expanded a net-long position in WTI futures to a 15-month high during the week ended Christmas Eve day and lifted their net-long RBOB position to a 14-month high.
Data released Monday aligned with the bullish sentiment, with China reported its industrial index broke above the 50-point mark this month for the first time since July.
News agencies are reporting that Chinese trade negotiator, Liu He, will lead a trade delegation to Washington on Saturday, Jan. 4, likely in preparation for a signing ceremony for the phase-one trade agreement.
Geopolitical tensions also supported oil futures after the United States carried out air strikes against the Hezbollah militia group in Iraq and Syria this weekend. The strikes stand as the first significant military response in retaliation for attacks by the Shia militia group that have injured numerous American military personnel. According to wire services, the Pentagon directive led to the destruction of five facilities in Iraq and Syria linked to the militia.
Violent protests in Baghdad have also fed into regional tensions this weekend following multiple deaths in antigovernment demonstrations. Iraqi protesters blockaded an oilfield and rallied in southern cities on Sunday amid political deadlock as government factions remained paralyzed in their attempts to form a new cabinet. Several hundred people demanding jobs shut off access to the Nasiriya field, 300 kilometers south of Baghdad, which produces 82,000 bpd of oil, according to Reuters. The two-day blockade is the first to disrupt operations in OPEC's second-largest producer since the start of the popular revolt set to enter its fourth month in early January.
Elsewhere, Libya's national oil company said Monday it may face closure of its key refinery in in the country's western Zawiaya port. Libya's largest functioning refinery in Zawiya is located around 30 miles from the capital, Tripoli. The situation remains fluid.
Liubov Georges can be reached at email@example.com
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