Oil Futures End Shallowly Mixed Amid Competing Dynamics

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session little changed in undefined trading, with crude futures firming amid production loss in Libya, while the gasoline contract eased following last week's stock build.

There were limited market drivers Thursday, although weekly unemployment data released during the morning hours was bullish against expectations, with the Labor Department reporting a 39,000 decline to 547,000 in the number of individuals seeking unemployment insurance for the first time last week. That's the best reading since pandemic-induced lockdowns took effect last year. However, the previous low in mid-March 2020 was 256,000, illustrating that while the country's economic performance is strengthening sharply amid heavy government spending and stimulus, the labor market is still on a long road to full recovery.

Thursday's unemployment number was supportive for gasoline futures in the abstract, with lower unemployment historically bullish for driving demand. However, Wednesday's supply report from the Energy Information Administration reported a modest build in gasoline stocks, pushing the inventory level to a 234.982 million barrel (bbl) seven-week high despite gasoline supplied to the U.S. market topping 9 million barrels per day (bpd) for the first time since August 2020 and for only the second time since lockdowns were imposed 13 months ago.

Earlier this week, news of force majeure on some oil production in Libya pushed the Brent contract to a nearly one-month high. Reports emerged Libya's National Oil Company was forced to make the force majeure declaration on oil exports at the port of Marsa el-Hariga after its subsidiary, Arabian Gulf Oil Co., shut operations in the eastern fields of Sarir and el-Bayda. Activity in the adjoining fields of Hamada, Mesla and Majid were also affected by the shutdown that is estimated to reduce crude output in the north African county by 280,000 bpd in coming days.

Production was reported shut in the eastern fields over a pay dispute with Libya's Petroleum Facilities Guard controlled by General Khalifa Haftar. Haftar controls a large swath of geography in the country's eastern region which includes oil terminals and production fields after a power-sharing agreement was reached late last year.

After years of civil war, a ceasefire was reached between Haftar and the government in Tripoli that is recognized by the United Nations in October 2020 allowing for oil production to increase. Included in the agreement were generous payouts to parties controlling the eastern fields. Arabian Gulf Oil Co. said Tripoli has not sent payment to cover operation going back to September 2020.

The reduced production in Libya countered an expected slowdown in oil demand in India following the decision by Prime Minister Narendra Modi to lockdown New Delhi and Mumbai due to spiking cases of COVID-19. Modi suggested the lockdown could expand beyond the country's two largest cities.

In a back-and-forth session, NYMEX June West Texas Intermediate futures settled up $0.08 at $61.43 bbl, and ICE June Brent futures also edged up $0.08 to $65.40 bbl. NYMEX May ULSD futures gained 0.71 cents with a $1.8608 gallon settlement, while May RBOB futures settled below trendline support for a second session, down 0.87 cents at $1.9747 gallon.

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

Brian Milne