Oil Futures End Higher on Short Covering, OPEC Uncertainty

    

   OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New 
York Mercantile Exchange and Brent crude on the Intercontinental Exchange 
settled higher today, reversing earlier declines as contracts touched 
multi-week lows overnight on expectations the Organization of the Petroleum 
Exporting Countries and non-OPEC leader Russia would decide to boost supply 
Friday at OPEC's biannual meeting in Vienna.

   Trader short covering intensified as trading advanced through midday 
following media reports that several OPEC members, namely Iran, Iraq and 
Venezuela, were prepared to vote to leave OPEC's existing 1.2 million bpd 
production cut in place. A later CNBC news story from Goldman Sachs sealed the 
fate for higher futures settlements as the firm predicted tight world oil 
supplies would continue on reduced supplies from Iran and Venezuela, which in 
their view could cause oil prices to rally in the second half of 2018.

   "Our updated global supply-demand balance continues to point to further 
declines in inventories and higher oil prices in the second half of 2018," 
Goldman Sachs said in an interview with CNBC, reaffirming its previous forecast 
for Brent at $82.50 bbl during the summer. 

   Analysts at Goldman said the prospect of OPEC producers announcing an 
increase to crude production levels later this week could actually have a 
bullish impact on oil prices. "We continue... to view the risks to this 
forecast as skewed to the upside, even if concerns over demand and higher OPEC 
production weigh on prices near term," Goldman said.

   While Goldman predicted OPEC and Russian production would increase by 1.0 
million bpd by the end of 2018, and by another 500,000 bpd in the first six 
months of 2019, they cautioned the impact of such a move would likely be offset 
by more supply disruptions from Venezuela and Iran.

   "Our updated fundamental oil balance shows... that the oil market remains in 
deficit with resilient demand growth and rising disruptions requiring higher 
core OPEC and Russia production to avoid a stock-out by year-end," Goldman 
Sachs said.

   OPEC and 10 non-OPEC oil producing countries led by Russia reached an 
agreement in late 2016 reducing their production 1.8 million bpd from the 
October 2016 output rate that took effect Jan. 1, 2017, and was set to run 
through year's end.

   The production cuts successfully cut down a burgeoning global supply glut, 
while economic collapse in Venezuela threatened to create a widening supply 
deficit. Those concerns grew after the United States re-imposed sanctions on 
Iran that take effect later this year that could, suggests the International 
Energy Agency, reduce Iran's crude exports by as much as 1.2 million bpd.

   During the first five months of 2018, OPEC data reveals Venezuela production 
is down 353,000 bpd to 1.392 million bpd.

   NYMEX July West Texas Intermediate futures reversed off a $63.59 10-week low 
on the spot continuous chart to settle up 79cts at $65.85 ahead of the 
contract's expiration at Wednesday's close, while August WTI futures rose 84cts 
to $65.69 bbl.

   ICE August Brent rose $1.90 bbl to a $75.34 bbl settlement after reversing 
off a $72.45 nearly seven-week low on the spot continuous chart, while 
September Brent finished $1.86 bbl higher at $74.94 bbl.

   NYMEX July RBOB futures off a 10-week spot low of $2.0055 gallon to settle 
3.14cts higher to $2.0546 gallon, while the August RBOB contract gained 3.26cts 
to $2.0440 gallon.

   July ULSD rallied 4.46cts gallon to settle at $2.1316 gallon after reversing 
off a $2.0658 nine-week low on the spot continuous chart, while the August USLD 
contract settled 4.36cts higher at $2.1337 gallon.

   Brian Whary, 1.732.678.7739, brian.whary@dtn.com , www.dtn.com. (c) 2018 
DTN. All rights reserved.