WASHINGTON (DTN) -- After sideways choppy trade for most of the session, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange edged higher in afternoon trade Monday, except for the NYMEX ULSD contract that posted a strong decline on the session, as traders continue to monitor developments in the Middle East following a flare-up in tensions between Washington and Tehran.
At settlement, NYMEX February West Texas Intermediate futures gained $0.22 to $63.27 barrel (bbl), while fading from an intra-session $64.72 eight-month high on the spot continuous chart. ICE March Brent edged up $0.31 to $68.91 bbl, paring an advance to $70.74 -- the highest trade since the attack on Saudi Arabia oil infrastructure in mid-September. NYMEX February ULSD futures dropped 2.75 cents to a $2.0339 gallon. The February RBOB contract edged up 0.56 cents to $1.7544 at settlement, dropping back from a $1.7943 five-month high on the spot continuous chart.
The oil futures rally came to a halt on Monday after Saudi Arabia and United Arab Emirates reassured markets the Organization of the Petroleum Exporting Countries would guarantee proper crude supplies in case of any disruption to the crude flow from the region. The announcement came as traders consider the large range of scenarios for crude prices if Iran indeed carries out a retaliatory attack on U.S. assets or its allies. However, Goldman Sachs analysts point out until the actual supply disruption takes place, it would be difficult to sustain oil prices near their current highs.
Meanwhile, private surveys show crude production from OPEC's 13 members fell to 29.50 million barrels per day (bpd) last month, driven by declines from Nigeria and Iraq as both nations strive for better quota compliance under the new production agreement. December surveys suggest Nigeria reduced output by 80,000 bpd and Iraq curbed its production by 50,000 bpd in December, pushing cartel's overall compliance with their agreement to 158%.
Surprisingly, Venezuela -- a country under U.S. sanctions for nearly 12 months, managed to boost crude supplies and increase exports in December. Reuters reported Venezuela's state oil firm PDVSA has agreed to joint ventures with Russia's Rosneft and China's CNPC to take over operations of the nation's oilfields.
Monday afternoon, markets continue to focus on the latest developments in the Middle East following last week's U.S. airstrike that killed Iran's top military Commander Qassem Soleimani, which has sharply elevated the risk of a conflict in the politically fragile region. So far, Tehran has announced a complete withdrawal from Comprehensive Plan of Action, commonly known as the Iran nuclear deal, and threatened to significantly accelerate its nuclear program. Most analysts agree Iran will seek to respond asymmetrically, but without going so far that sparks a military conflict with the United States.
Elsewhere, Libya shut down all four oil export terminals on Sunday due to hazardous weather conditions that could last several days, terminating all flows out of the country's eastern provinces. The bulk of the oil exported from the ports comes from the Waha fields, where output has recently averaged around 350,000 bpd. According to sources, the port closure could have a meaningful effect on production from the fields if there are no loadings for a prolonged period.
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