Oil Futures Settle mostly Lower as Market awaits New Data
CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange and
the Brent contract on the Intercontinental Exchange settled mostly lower
Tuesday in ongoing rangebound trade amid little new news effecting oil demand,
with traders awaiting weekly supply data and monthly outlooks that begin midday
Wednesday before adjusting course.
Weekly data from the American Petroleum Institute and Energy Information
Administration are delayed a day by Monday's federal holiday in observance of
Veteran's Day, with EIA to provide an update to its short-term outlook midday
At settlement, NYMEX December West Texas Intermediate futures settled flat,
down $0.06 at $56.80 bbl ahead of Friday's expiration of September WTI options,
with the January contract settling at $56.85 bbl. ICE January Brent futures
ended the session with a $0.12 decline at $62.06 bbl.
Trade in the diesel contract was more volatile, with December ULSD futures
settling lower for a fifth straight session, falling 1.66cts to a $1.8976
gallon 1-1/2 week low on the spot continuous chart. December RBOB futures
settled up 0.45cts at $1.6144 gallon after inside trade.
In speech at the Economic Club in New York today, U.S. President Donald
Trump reiterated that the United States remains close to signing a "phase one"
trade deal with China but repeated the deal would only be agreed to if it was
good for the country and U.S. workers, according to Reuters.
The crude contracts rallied to six-week highs last week on reports out of
China that the two sides agreed to a "phase one" trade deal that included a
synchronized roll back of tariffs. By week's end, Trump said he did not agree
to a tariff rollback, sparking selling, and returning markets back to
Markets remained hemmed in by the uncertainty over the trade negotiations,
with an agreement seen sparking an extended rally in commodities and equities
on the prospect of improved export trade. The more than yearlong trade war
between the world's two largest economies, along with trade spats elsewhere
globally, is blamed for slowing economic growth globally that has dampened
demand for oil. Both the United States and China have experienced slowing
economic growth since tariffs were slapped on each other's imports, with
export-driven Germany teetering on recession. Germany will release its third
quarter gross domestic product estimate Thursday morning.
Oil futures were also pressured at the outset of this week by third party
reports that oil production by the Organization of the Petroleum Exporting
Countries moved off a decade low output rate in October, with Iraq and Nigeria
continuing to produce above their quotas outlined in the OPEC+ agreement. A
jump in crude production in Saudi Arabia also pushed OPEC output up, with the
Kingdom's production having recovered from the mid-September attack on its main
crude processing facility.
Saudi Arabia, according to Reuters, produced 10.3 million bpd in October
after plunging 660,000 bpd in September to 9.13 million bpd due to the attack.
Of that total, 9.89 million bpd was shipped to market, holding below its
allotted quota of 10.311 million bpd, with the rest of the supply moved into
inventory. Saudis drew down oil inventory in the wake of the attack to ensure
it met customer requirements.
The third party estimates are followed with Thursday's Monthly Oil Market
Report from OPEC that will include production rates by cartel members.
The big jump in OPEC production in October comes in front of the early
December gathering of OPEC and non-OPEC members partnered in an OPEC+ in
Vienna. Oman's representative has already said the meeting will focus on
members adhering to current quotas and not making deeper production cuts.
An improving demand picture for oil and slowing U.S. shale production were
noted in maintaining the existing accord through first quarter 2020.
U.S. shale production growth, while holding at a record high 12.6 million
bpd, is seen slowing as investors have grown tired of the money burn, limiting
investment into the once hot sector. Mike Sabella, research analyst with Bank
of America Merrill Lynch, sizes up the transition in a research note this
morning under the title "painful reset for US Shale activity as industry
"The structural shift in US E&P spending habits is forcing a major reset for
US land activity, where the [horizontal] rig count is now down 238 rigs from
the peak. 2019 will likely be the first year since the US shale revolution
started a decade ago that the industry won't outspend cashflow. At some point
reduced spending levels are going to have negative implications for US shale
Brian L. Milne, 1.402.255.8020, firstname.lastname@example.org, www.dtn.com. (c) 2019
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