Morning Market Overview
New York Mercantile Exchange nearest delivered oil futures and Brent on the Intercontinental Exchange moved sharply higher in early trading following profit taking on Thursday, with the West Texas Intermediate, Brent and ULSD contracts erasing the prior day losses.
The crude contracts reached five-month highs this week on a tightening world oil supply-demand disposition amid production cuts by the Organization of the Petroleum Exporting Countries, Russia, and nine additional non-OPEC oil producers. Citing secondary courses, OPEC on Wednesday reported production by the cartel plunged 534,000 bpd in March to a better-than four-year low at 30.022 million bpd.
Oil production in Venezuela, which is exempt from the OPEC+ agreement, tumbled 289,000 bpd to 732,000 bpd, as U.S. sanctions and widespread power outages inhibited operations. U.S. sanctions on Iran continue to restrict output, which fell to a 2.698 million bpd 5-1/2 year low last month. Markets are also concerned Libyan oil supply could be disrupted amid an escalation of violence that could spark a full blown civil war. Libya crude production was 1.098 million bpd in March, a five-month high.
Reuters reports OPEC might reduce the size of their production cut when they meet in late June if oil production from Venezuela and Iran continue to decline sharply and Brent crude moves into the mid-$80 bbl range. The current production accord expires on June 30. WTI futures are also bolstered in early trading on a weakening U.S. dollar, which plunged early Friday.
The greenback swung to a 96.38 two-week low in early index trading, testing support at the 96.346 100-day moving average.
Data out of Beijing and Brussels also boosted market sentiment. China’s merchandise trade balance widened well above expectations to $32.64 billion, with exports jumping 14.2% following a 20.7% plunge in February that was affected by Chinese New Year holidays. Also lending support industrial production in the Eurozone eased a less-than-expected 0.2% in February while January’s output was revised higher.