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NYMEX Crude $ 40.36 UP $.6400
NY Harbor ULSD $1.2147 UP $.0143
NYMEX Gasoline $1.5077 UP $.0440

NEWS
Oil futures settled back above $40 a barrel on Monday for the first time since late March, buoyed by a third straight week of declines in the number of U.S. rigs drilling for crude as well as data pointing to stronger domestic and Chinese demand.

Prices got an added boost after U.S. government data, released just ahead of the settlement, revealed expectations for a sizable decline in next month’s domestic shale-oil production. Crude for delivery in May settled at $40.36 a barrel on the New York Mercantile Exchange, up 64 cents, or 1.6%. June Brent crude on London’s ICE Futures exchange climbed by 89 cents, or 2.1%, to $42.83 a barrel. “There are signs that demand for oil is exceeding expectations” and the market is “at a point where we should see U.S. oil production continue to fall,” said Phil Flynn, senior market analyst at Price Futures Group. “Recent data from the U.S. and China continues to suggest that low prices may be feeding an oil demand boom,” he said. “Not only did U.S. refiners refine at a very strong record pace last week, leading to surprise decrease in crude supply, [but] we also saw a record for Chinese crude imports in February.” In February, China’s crude imports rose nearly 25% on-year to 31.8 million metric tons, equivalent to roughly 8 million barrels a day, the highest daily average on the record. Preliminary data on China’s March oil imports and exports will be released Wednesday.

Just ahead of the settlement for WTI oil prices Monday, the Energy Information Administration said in a monthly report that oil output from seven major domestic shale plays is expected to fall by 114,000 barrels a day in May from April. Last week, separate data showed that U.S. crude inventories and drilling activities declined. The U.S. oil-rig count fell by eight to 354 in the latest week, according to Baker Hughes maintaining a streak of declines. The oil-rig situation is “getting desperate,” with the count of 354 the “lowest number since the early 90s,” he said. And with domestic “oil output falling to 9 million barrels a day, it will take a big increase in oil imports into the U.S. to stop a second week of falling supply.”

U.S. crude stockpiles also fell in the week ended April 1 by 4.9 million barrels to 529.9 million barrels, but remain at historically high levels for this time of year, the EIA said Wednesday. Crude prices have been range-bound for weeks as the market awaits the outcome of a meeting in Doha this Sunday at which major producers, such as Saudi Arabia and Russia, are scheduled to discuss a possible production freeze. However, there is mounting skepticism among market experts that an agreement might not materialize after Saudi Arabia said it would opt out of the pact if Iran remains defiant by ramping up production until its output reaches pre-sanction levels of about 4 million barrels a day.

Even if participants in the April 17 meeting arrive at a consensus on a production freeze, “it is unlikely to quicken the rebalancing of the oil market and will likely disappoint traders, potentially leading to a negative price correction,” said Austin Sapp, a commodity analyst intern at Schneider Electric.