Fueling Strategy: Please fill as needed today/tonight – Be Safe

NYMEX Crude $ 50.73 UP $.4000
NY Harbor ULSD $1.6021 UP $.0194
NYMEX Gasoline $1.6626 UP $.0103

NEWS
Oil prices climbed on Monday, pushing futures to their highest settlement in about a month, as expectations grow for an extension to the OPEC-led production cut agreement into the first quarter of next year.

June West Texas Intermediate crude tacked on 40 cents, or 0.8%, to settle at $50.73 a barrel. The contract expired at the session’s end, and July crude which ended at $51.13, up 46 cents, or 0.9%, is now the front-month contract. July Brent crude LCON7, +0.37% the global benchmark, rose 26 cents, or 0.5%, to $53.87 a barrel.

Major oil producers will join members of the Organization of the Petroleum Exporting Countries in Vienna this week to discuss extending the six-month agreement to cut production by 1.8 million barrels a day set to expire in June. There is near unanimity among watchers that the deal will be extended, with the only real questions centered on length and severity of cuts.

News reports Monday said that Saudi Arabia and Iraq together back a nine-month extension to the OPEC output cuts. That news comes a week after the Saudis released a joint statement with non-OPEC Russia also backing an extension to the end of March 2018. Saudi Arabia’s Energy Minister Khalid al-Falih also said Monday that he doesn’t expect any OPEC opposition toward a nine-month extension, according to Reuters. Sentiment regarding a new deal has helped oil rebound 10% over the past two weeks. The Saudis have “voiced that an extension of cuts [by] nine months is essentially in place,” said Bill Baruch, chief market strategist at iiTRADER. “We feel that much of this price action is a potential buy the rumor sell the fact.” Gains on Monday may also be attributed to the “June contract falling off the board,” he added.

Meanwhile, Gordon Kwan, head of regional energy research at Nomura, said deeper production cuts of more than 2 million barrels a day may be discussed as Saudi Arabia is showing signs of impatience with the pace of rebalancing, which is happening slowly as U.S. producers have stepped up output this year. Nomura estimates that OPEC has been 90%-compliant with the promised cuts so far, but the rebalancing of supply and demand could still be as far as 18 months away, after the buildup of stocks over the past three years. “Although markets widely expect a meeting between OPEC and non-OPEC members on May 25 to conclude with the current output deal extended by another nine months, it remains a question of how U.S. shale reacts,” said Lukman Otunuga, research analyst at FXTM, in a note Monday.

“While prices could edge higher following the extension of the production cut deal, the upside should face headwinds if U.S. shale continues to pump oil incessantly into the already oversaturated markets,” he said. U.S. shale-oil producers have been steadily ramping up production with the Energy Information Administration, forecasting U.S. output to hit a record of nearly 10 million barrels a day in 2018.

The U.S. oil-rig count, an indicator of activity in the sector, rose by 8 to 720, according to weekly data published by Baker Hughes Inc. Friday.

Have a great day,

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