Morning Market Overview
Oil markets settled mixed Thursday afternoon after hitting 2019 highs, save ULSD, on bearish economic data from China, while crude production growth in the United States stalls alongside ongoing cuts from Organization of the Petroleum Exporting Countries.
At the market close, NYMEX April West Texas Intermediate futures rallied to a $58.74 bbl four-month high on the spot continuous chart, settling the session with a $0.35 gain at $58.61. ICE May Brent crude futures settled down $0.32 at $67.23 bbl, reversing off at $68.14 bbl four-month spot high. NYMEX April RBOB futures reversed from a $1.8822 five-month spot high to settle 0.73cts lower at $1.8495 gallon, while April ULSD futures edged down 0.72cts to a $1.9849/gallon settlement. Oil futures came under selling pressure Thursday afternoon following overnight industrial data from China, showing output fell to a 17-year low in the first two months of the year.
Chinese industrial production expanded by less-than-expected 5.3%, down 0.4% from December, while the unemployment rate jumped sharply higher to 5.3% in February from 4.9% in December. Industrial contraction and job-shedding by export-oriented companies point to further weakness in the world’s second-largest economy.
Last week, China reported its exports tumbled 20.7% in February, the lowest in three years, which also suggests U.S. tariffs on Chinese goods and cooling global demand are taking a greater toll on its economy. U.S. President Donald Trump said on Wednesday he was in no rush to complete a trade pact with China and suggested the U.S.-China trade agreement might be delayed until late April at the earliest.
On supply, OPEC production fell 221,000 bpd to 30.5 million bpd in February, according to an assessment by secondary sources in the cartel’s Monthly Oil Market Report released Thursday morning. Involuntarily losses from Venezuela accounted for a majority of decline, with the country’s output down 142,000 bpd to 1.008 million bpd in February. Saudi Arabia’s production reached a 10- month low for the profiled month, pumping 10.087 million bpd and well below its required quota under the OPEC+ agreement.
Last month, Saudi Arabia recorded a 166% compliance rate with the OPEC+ agreement, while two key members of the cartel are currently failing to meet the agreed quotas. Iraq’s compliance was only at 73% in February, while Nigeria also failed to meet an assigned production ceiling, despite coming under pressure from Riyadh to step up its compliance. The tightening global market comes as Energy Information Administration midweek reported a larger-than-expected 3.9 million bbl drawdown from U.S. commercial crude inventory during the week ended March 8.
EIA data also shows the year-on-year growth rate in domestic crude production detailed in the weekly figure has narrowed since the first week in January, reflecting the trend of falling oil rigs and after EIA lowered its growth estimates for this year and next. Baker Hughes on March 8 reported the U.S. oil rig count at an 834 10-month low, with 51 rigs taken out of service year-to-date.