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PREVIEW: Oil Futures Rally ahead of OPEC Output Decision
6/22 7:37 AM
PREVIEW: Oil Futures Rally ahead of OPEC Output Decision OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were higher in early morning trade, as an expected agreement to increase production at today's meeting of the Organization of the Petroleum Exporting Countries isn't likely to flood the market with oil as some traders earlier predicted. While consensus of an increase seems increasingly certain, analysts say the expected production boost of between 600,000 and 1.0 million bpd could be largely offset by output declines in the second half of this year from OPEC members Venezuela and Iran. OPEC's 14 nations and its 10-member non-OPEC counterparts meet today and Saturday in Vienna, and have had meetings since early this week in preparation for the biannual event. Saudi Arabia said Thursday actual supply cuts are closer to 2.8 million bpd because of involuntary output declines largely the result of Venezuela, whose oil sector is crumbling from years of mismanagement and the collapse of its economy. Asset seizures by ConocoPhillips are hastening the decline as the country is unable to utilize its loading facilities in the Caribbean and has been forced to use older, less-efficient in-country ports. The re-imposition of oil sanctions on Iran at the hand of U.S. President Donald Trump in May could also remove as much as 1.2 million bpd from the market later this year, Paris-based oil watchdog group International Energy Agency recently estimated. OPEC data shows Venezuela production in May at 1.392 million bpd, down from output at 2.072 million bpd in October 2016, the baseline for the OPEC cuts. Venezuela's agreed to production quota is 1.972 million bpd. Angola is also producing below its allotted quota, while Libya output has dropped sharply this month amid renewed fighting between rival militant groups seeking control of the North African nation. News reports Thursday indicated Saudi Arabia's oil minister Khalid al-Falih said he was optimistic the group would reach a deal to increase output but that the magnitude of the increase would "depend on consensus." Recently, Iraq, Iran and Venezuela have been against a plan to boost production, arguing production cuts, which reduced output by 1.8 million bpd from October 2016 output rates, should be maintained through year end. They also disagreed with raising production because they argued Saudi Arabia and non-OPEC leader Russia would be the main beneficiaries of a production increase since they have the majority of spare production capacity. Market bulls contend the increased use of spare production capacity by Saudi Arabia and Russia could leave the market subject to supply shocks if unforeseen events further curtail oil production. Supplies could also remain tight after the production increases given Wednesday's data from the Energy Information Administration showing commercial crude oil inventories down a much larger-than-expected 5.9 million bbl to 426.5 million bbl during the week-ended June 15, falling 10.057 million bbl over the past two weeks and down 16.2% from the same week in 2017. U.S. oil production is at a record 10.9 million bpd high, with output seen increasing through 2019. Futures at 8:00 AM ET NYMEX Contract Last Change High Low WTI Aug. $66.53 $0.99 $66.74 $65.71 WTI Sept. $65.82 $0.96 $66.02 $64.99 ULSD July $2.1099 $0.0398 $2.1148 $2.0749 ULSD Aug. $2.1123 $0.0385 $2.1180 $2.0785 RBOB July $2.0449 $0.0303 $2.0461 $2.0133 RBOB Aug. $2.0257 $0.0304 $2.0308 $1.9968 ICE Brent Aug. $74.46 $1.41 $74.73 $73.24 Brent Sept. $74.28 $1.48 $74.53 $72.98 SPOT PRODUCT MARKETS Spot market gasoline and diesel fuel prices fell for a third day on Thursday in major U.S. cash trading regions fueled by fresh weakness in RBOB and ULSD futures headed into today's oil producers' meeting in Vienna. Suboctane regular in Portland bucked the market retreat, riding a 400pts basis surge to a 12.0cts MERC premium that boosted spot price by 3.38cts to $2.1323 gallon. CARBOB in San Francisco fell 2.62cts to $2.0373 gallon, and was rated at a 2.5cts bay discount in Los Angeles. Conventional unleaded 9.0-lb. regular at the Gulf Coast and RBOB in in New York Harbor drifted lower in line with the 1.12cts futures downturn, and backtracked 1.87cts in Midwest markets, where basis discounts increased by 75pts. Portland ULSD tumbled 450pts in basis and 8.20cts in flat price to $2.2601 gallon, rated 19.0cts over the July futures print. CARB ULSD plunged 5.70cts in San Francisco versus a 3.0cts futures premium, and posted a 2.79cts loss in Los Angeles indexed 250pts over the MERC. ULSD prices in markets east of the Rockies registered losses at or near parity with the 3.70cts pullback in July ULSD futures. NEW YORK HARBOR GULF COAST Heating Oil $2.0697 Heating Oil $1.9222 ULS Heating Oil $2.0772 ULS Heating Oil $2.0347 ULSD $2.1097 ULSD $2.0647 Jet, 54-grade $2.0922 Jet, 54-grade $2.0447 Conventional Regular $1.9849 Conventional Regular $1.9644 RBOB $2.0499 Conventional Premium $2.1614 PBOB $2.1899 RBOB $2.0274 CBOB Regular $1.9199 PBOB $2.1734 CBOB Premium $2.1549 CBOB Regular $1.9539 CBOB Regular 7.8 $1.9699 CBOB Premium $2.1434 CBOB Premium 7.8 $2.1974 A2 CBOB $1.8939 D2 CBOB $2.0699 GROUP 3 ULSD $2.1172 Jet $2.0647 CHICAGO Suboctane Gasoline $1.9499 ULSD $2.1197 Conventional Premium $2.1599 Jet $2.0947 CBOB Regular $1.9574 LOS ANGELES Conventional Premium $2.2924 ULSD $2.1373 RBOB $2.1274 CARB ULSD $2.1373 PBOB $2.4274 Jet $2.1198 Conventional Regular $1.9799 Conventional Premium $2.1949 PORTLAND CARBOB Regular $2.0449 ULSD $2.2997 CARBOB Premium $2.1949 Jet $2.1572 Suboctane Gasoline $2.1649 SAN FRANCISCO Conventional Premium $2.5099 ULSD $2.1397 CARB ULSD $2.1397 Jet $2.1172 Conventional Regular $2.0349 Conventional Premium $2.3299 CARBOB Regular $2.0699 CARBOB Premium $2.3299 Brian Whary, 1.732.678.7739, brian.whary@dtn.com, www.dtn.com. 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