NEWS

U.S. oil prices settled modestly lower Thursday after ending at a nearly five-month high a day earlier, as traders looked to the production-cut agreement led by OPEC to further tighten global crude supplies.

The market also weighed data from a U.S. government report released Wednesday, which showed a larger-than-expected weekly rise in domestic crude supplies and a sizable climb in production. The data, however, also revealed that petroleum-product inventories dropped more than expected and refinery activity has improved as the Gulf of Mexico region recovers from Hurricane Harvey.

U.S. benchmark, November West Texas Intermediate crude lost 14 cents, or 0.3%, to settle at $50.55 a barrel on the New York Mercantile Exchange after tapping a high of $50.81. A day earlier, the October contract, which expired at Wednesday’s settlement, finished at a four-month high for a front-month contract, according to FactSet data. Meanwhile, November Brent crude the global benchmark, edged up by 14 cents, or 0.3%, to end at $56.43 a barrel on the ICE Futures Europe exchange. It ended at $56.29 Wednesday, the highest since late February.

“Broadly speaking, market focus is on more than just U.S. production trends as the OPEC/Non-OPEC meeting [Friday] could potentially spark a rally if [oil] export controls are mentioned,” said Tyler Richey, co-editor of the Sevens Report. Members of the Organization of the Petroleum Exporting Countries and other major producers will meet Friday in Vienna to discuss the effect of the production-cap agreement and progress toward a balance between supply and demand. “Bottom line, the market remains range bound right now as fundamentals become less bearish and the technical outlook continues to improve,” said Richey. “But that could change in a hurry if OPEC disappoints (again) or if the U.S. oil production machine roars back to new multiyear highs in the coming weeks.”

The Energy Information Administration reported Wednesday that total U.S. crude production climbed by 157,000 barrels a day to 9.510 million barrels for the week ended Sept. 15. That marked a slowdown from the 572,00-barrel jump it saw a week earlier. U.S. stocks of oil products including distillates and gasoline have been falling since Hurricane Harvey disrupted many refiners’ activities since late August. The EIA reported that distillate stockpiles fell 5.7 million barrels last week. “All refineries around the globe will try to maximize runs to replace the deficit of distillate and that is making for higher seaborne crude oil demand,” said Olivier Jakob, managing director at oil consultancy Petromatrix. Meanwhile, the independence referendum in Iraq’s Kurdistan Monday will also be watched closely due to the large volume of oil exports from the region. There has been international opposition to the referendum, and how Turkey reacts to the outcome could be key, given the vast majority of Kurdistan’s oil exports pass through Turkey, Jakob said.

Elsewhere on Nymex, prices for natural gas extended earlier losses after data showed that weekly supplies of the commodity rose more than expected.