Oil Ends Mixed on OPEC Talk

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange finished the first day of June mixed, with ULSD and RBOB futures under pressure from escalating social unrest in major U.S. cities following the violent death of George Floyd in the custody of Minneapolis police, adding further pressure on the economy already reeling from the coronavirus pandemic.

National Guard troops have now been deployed to 15 states and over a dozen metropolitan areas declared curfews, potentially stalling plans to reopen the economy. Washington, D.C., became the latest city to declare a nightly curfew following the outbreak of violent protests across the nation's capital. Associated Press reported President Donald Trump and the first lady took refuge in the White House bunker as a security precaution.

The U.S. dollar plunged Monday to near a 12-week low 97.770 against the basket of foreign currencies but stocks on Wall Street shrugged off the riots, bouncing higher in afternoon trade. The Institute of Supply Management reported Monday manufacturing activity in the United States moved up from an 11-year low to 43.1% last month, although the sector remains in contraction.

RBOB and ULSD futures, however, came under selling pressure as social unrest in U.S. cities will likely take a toll on short-term demand for refined products. Mobility data shows traffic activity in New York City, Washington, D.C., and Los Angeles remains below the Jan. 13 baseline despite gasoline demand typically growing following Memorial Day. In Chicago, authorities suspended rail and bus service, while advising essential workers to stay home.

Against this backdrop, Organization of the Petroleum Exporting Countries and Russia-led allies are debating whether to move up their planned meeting from June 10 to Thursday. Wire services report Russia has reached a tentative agreement with Saudi Arabia to extend current 9.7 million barrels per day (bpd) cuts for another one to two months, with producers closely monitoring situation in the United States. The current agreement calls for OPEC+ output cuts to step down from 9.7 million bpd this month to 7.7 million bpd for the second half of 2020.

However, private surveys report the cartel is still behind its pledged cuts, having reduced supplies by 4.48 million bpd in May vs. 9.7 million bpd pledged. Iraq and Nigeria remain the laggard members, with the latter meeting only 19% of its promised reduction. Cumulatively, OPEC members pumped 24.77 million bpd in May, down 5.91 million bpd from April's revised figure.

NYMEX West Texas Intermediate July futures finished Monday session little changed at $35.44 barrel (bbl) and Brent crude for August delivery settled up $0.48 at $38.32 bbl, with both benchmarks walking back losses earlier in the session. NYMEX ULSD July futures moved modestly lower to $1.0290 gallon and front-month RBOB July contract ended the session 1.18 cents lower at $1.0667 gallon.

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

Liubov Georges