DTN Oil

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange accelerated losses in afternoon trading Thursday despite Organization of the Petroleum Exporting Countries in their Monthly Oil Market Report indicating supply outages in Nigeria and Iraq depressed the cartel's oil production in April by almost 200,000 bpd, offsetting modest increases by some Middle East producers.

The output drop was realized as the 13-member cartel, which has consistently struggled to meet its own production targets in recent months, reduced production quotas by 1.2 million bpd beginning on May 1.

OPEC oil production declined 191,000 bpd in April to 28.6 million bpd, according to secondary sources cited in their MOMR released this morning, driven by the steep output fall in Iraq and Nigeria.

Iraq's production fell by almost 200,000 bpd in the reviewed month due to an ongoing dispute over oil revenues with Turkey and the semiautonomous region of Kurdistan. The pipeline carrying Kurdish oil to Turkey's Mediterranean coast has been closed for over a month even as talks to resolve the issue have shown signs of progress. Flows through the pipeline are set to resume this month but the timeline has repeatedly been pushed back. The drop off in production pressed Iraqi crude production 292,000 bpd below its voluntary quota established in October 2022, and 81,000 bpd less than its quota that took effect this month.

Nigeria, Africa's largest oil producer, reduced oil production by 170,000 bpd in the reviewed month to 1.18 million bpd, with output under pressure from vandalism and a lack of new investment in the sector.

Russia, meanwhile, which is allied with OPEC, appears to have maintained its output despite saying earlier this year that it would reduce production by 500,000 bpd. As part of a Saudi-led action, Moscow said it would extend those cuts until the end of the year.

On the demand side, OPEC left its oil consumption growth outlook for this year unchanged at 2.3 million bpd, with nearly all of the growth to come from countries that are not part of the Organization for Economic Cooperation and Development. OECD oil consumption is projected to grow by a modest 100,000 bpd. Within the regions, slight downward adjustments for OECD in the first quarter were offset by upward revisions for non-OECD.

In broader markets, investors continued to digest April's Consumer Price Index report released Wednesday that showed inflation on an annualized basis declined for each of the past ten months from its peak of 9.1% in mid-summer 2022. Headline inflation now stands at 4.9% -- its first reading below 5% in two years, and below the federal funds rate that currently stands in a 5% to 5.25% target range. Fed officials have long said that to bring inflation to its 2% target, the federal funds rate must be lifted above the rate of inflation.

Looking deeper into the data, food prices have stabilized for the second straight month in April, as the "food at home" price category declined to a negative 0.2%. The shelter category of the CPI, which makes up a third of core prices, increased at a slower rate compared to prior months as indices for airline fares and new vehicles all declined during the month. Investors bet April's inflation report is likely to keep the Fed on course to pause rate increases at their next meeting in June and July after central bank officials shifted focus towards lagging indicators of economic activity to assess the impact of recent bank failures on lending conditions and economic activity. Over 93% of investors anticipate the Federal Reserve will keep interest rates unchanged at the next two meetings before introducing its first rate cut in September.

At settlement, NYMEX West Texas Intermediate June futures dropped back to $70.87 bbl, down $1.69 bbl, while ICE Brent July futures declined $1.43 to $74.98 bbl. NYMEX RBOB June futures retreated $0.0372 to $2.4577 gallon, and the front-month ULSD contract dropped $0.0439 to $2.3495 gallon.