Fueling Strategy: Please fill as needed tonight, Be Safe Tonight!

NYMEX Crude $ 46.34 UP $.5700
NY Harbor ULSD $1.5169 UP $.0017
NYMEX Gasoline $1.5568 DN $.0065

NEWS
Oil ended higher Monday, as news that Saudi Arabia has pledged to lower crude exports and Nigeria plans to limit its production sent prices higher for the first time in three sessions.

September West Texas Intermediate crude rose by 57 cents, or 1.3%, to settle at $46.34 a barrel on the New York Mercantile Exchange. September Brent crude on London’s ICE Futures exchange tacked on 54 cents, or 1.1%, to $48.60 a barrel. Oil prices posted declines in each of the last two sessions.

Energy ministers from major crude-producing nations gathered in St. Petersburg, Russia Monday, as part of a monthly meeting held to monitor compliance with crude production limits set by an agreement led by the Organization of the Petroleum Exporting Countries that began at the start of the year.

Saudi Arabia, which is the world’s largest oil exporter, agreed to limit its exports at 6.6 million barrels a day, while Nigeria also committed to taking part in production cuts if it reaches a production level of 1.8 million barrels a day, according to a report from The Wall Street Journal. “Saudi Arabia announced its plan to cut exports and this is their way of gluing things back together,” said Bill Baruch, chief market strategist at iiTRADER. Nigeria’s current production is below that level—at about 1.6 million barrels a day in June. News reports, meanwhile, indicate that the Saudi export cut would amount to roughly one million barrels a day, compared with a year ago. Michael Lynch, president of president of Strategic Energy & Economic Research, said the drop in exports that the Saudis plan for next month would coincide with higher domestic energy demand for cooling, and referred to the Nigeria and Saudi Arabia decisions as “mostly conciliatory.”

Nigeria and Libya have seen their own output rebound faster than expected. The two OPEC members have been exempt from the production-cut deal as their output recovers from years of civil unrest. OPEC members had agreed to reduce their output by about 1.2 million barrels a day from Jan. 1 of this year through the end of March next year. But tanker tracker Petro-Logistics on Friday reported that OPEC output is expected to top 33 million barrels a day this month, up 145,000 barrels a day from June, according to Reuters.

“The only significant thing about the meeting is that Nigeria has voluntarily agreed that they will not increase their production above 1.8 [million barrels a day] once they have achieved that level,” said Naeem Aslam, chief market analyst at ThinkMarkets U.K. But when it comes to the “compliance side of things,” that’s getting “really ugly,” he said. “A lot of cheating is already happening and we are only half [way] through this agreement.” Saudi energy minister Khalid al-Falih said Monday the coalition’s compliance with the production deal was strong, but he also said there were laggards whose issues had to be dealt with “head on,” WSJ noted.

Meanwhile, growth in U.S. oil production, with total output reaching its highest level in two years, has worked to offset some of the impact of the production cuts among OPEC members and its allies. “With strong earnings out of Halliburton [Monday] indicating robust oilfield activity in the U.S., shale production remains an issue for OPEC that could keep a cap on the upside for oil,” said Colin Cieszynski, chief market strategist at CMC Markets. OPEC secretary-general Mohammad Barkindo, however, recently outlined a rosier picture, saying the rebalancing of oil-market supply and demand is “bound to accelerate in the second half.”

Have a great day,

Loren R. Bailey, Founder & Owner
FUEL MANAGER SERVICES INC
“Serving the Trucking Industry Since 1992”