Crude Lower in Monday Trade

WASHINGTON (DTN) -- Nearest-delivery oil futures on New York Mercantile Exchange and Brent crude on the Intercontinental Exchange turned lower at the start of a new trading week, pressured by supply data, indicating sharp production increases in countries from the Organization of the Petroleum Exporting Countries and Russia ahead of their deal reducing 9.7 million barrels per day (bpd) in production that took effect Friday.

Russia's crude output jumped to a one-year high 11.35 million bpd in April days ahead of agreed to cuts with its OPEC's partners, according to official data released Saturday. The new figure exempts production of gas condensate, or light oil that is being disclosed separately and would likely inflate last month's figure further.

Moscow is expected to curb production by 2.5 million bpd from a baseline of 11 million bpd in May and June per the OPEC+ agreement. Experts, however, are skeptical production cuts of this magnitude will be achieved in such a short period of time due to many technical challenges and aging infrastructure.

A private survey showed production from the 13-member OPEC jumped 1.61 million bpd to 30.25 million bpd last month, driven by sizable increases from Saudi Arabia. Reuters reported the kingdom pumped a record 11.3 million bpd last month, with another set of data indicating its crude exports rose by 2.2 million bpd last month.

Global oil demand is set for a long and bumpy road to recovery in 2020. Investment bank Goldman Sachs forecasts a three-stage oil market rebalancing, starting with "violent rebalancing" in the second quarter before fundamentals finally start to show signs of improvement into year's end.

International Energy Agency estimates that consumption will be down 25.8 million bpd in May, and 14.6 million bpd in June. In December, it would still be 2.7 million a day below 2019 levels, forecasts IEA.

Overnight data from eurozone once again showed an unprecedented contraction in its manufacturing sector, down to an all-time low 33.4 in April.

"Euro area manufacturing output plunged to an extent greatly exceeding any decline previously seen in the near 23-year history of the PMI survey in April, reflecting a combination of factors including widespread factory closures, slumping demand and supply shortages, all linked to the COVID-19 outbreak," said Markit's chief economist Chris Williamson.

In the United States, however, there are emerging signs gasoline consumption bottomed in mid-April and is now on a solid path for recovery. Motor gasoline demand has increased from 5.065 million bpd at the start of April to 5.86 million bpd during the week ended April 24, data from the Energy Information Administration shows, with nearly half of U.S. states having now lifted some sort of restrictions that were put in place to mitigate the spread of the deadly coronavirus.

In early trading, NYMEX June West Texas Intermediate futures dropped back $1.09 to $18.70 barrel (bbl) after posting its first weekly gain in nearly a month. The international crude benchmark Brent contract for July delivery moved down $0.63 to trade near $25.79 bbl. NYMEX June ULSD futures were little changed near $0.7984 gallon and NYMEX June RBOB futures declined 1.48 cents to $0.7515, reversing lower from Friday's $0.8029 six-week high on the spot continuous chart.

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