U.S. oil prices settled little changed on Monday after posting a roughly 5% gain last week, as traders weighed prospects for an extension to the OPEC-led production cut agreement and expectations for U.S. crude output.

Natural-gas futures, meanwhile, got a weather-related boost to their highest level in nearly four months.

On the New York Mercantile Exchange, October West Texas Intermediate crude tacked on 2 cents, or less than 0.5%, to settle at $49.91 a barrel. Prices for the contract, which expire at Wednesday’s settlement, rose by 5.1% last week, touching an intraday high of $50.50, which represents a peak since May, according to FactSet data. November Brent crude the global oil benchmark, lost 14 cents, or 0.3%, to $55.48 a barrel on the ICE Futures Europe exchange.

“There’s a strong tug of war going on,” said Patrick DeHaan, senior petroleum analyst at fuel-price tracker GasBuddy. “On one side, the rig count fell to its lowest since June. The other is oil inventories continue rising because of [Hurricane] Harvey’s havoc on Gulf refiners.” There’s also resistance building at $50 a barrel for WTI, he said. “A rut is being worn in the longer it can’t break $50.” Still, “the general news out of [Organization of the Petroleum Exporting Countries] continues to prove price supportive, with the cartel still leaning towards a deal extension and Nigeria now declaring force majeure on deliveries of one of the country’s major crude grades,” said Robbie Fraser, commodity analyst at Schneider Electric. “While the reduction in supply is bullish for near-term trading, it also lowers the odds of Nigeria being effectively brought into the fold of the current output deal, with the country uninterested in joining until they can achieve sustained production stability,” he said in a note.

Over in the U.S., the number of active domestic oil rigs declined last week, for a second week in a row, according to data from Baker Hughes suggesting a possible decline in oil production. “Sub $50-a-barrel oil has taken its toll on cash-strapped shale producers,” said Phil Flynn, senior market analyst at Price Futures Group. “We are seeing a significant slowdown [in rig counts] in the second quarter and now rigs are falling in the third quarter. Unless we see a significant increase in the price of oil, the U.S. rig count has peaked and will continue to decline.” On Monday, a report from the Energy Information Administration showed expectations for a monthly climb of 79,000 barrels a day in October output from seven major U.S. crude-oil shale plays, to 6.083 million barrels a day. The largest increase—55,000 barrels a day—is expected seen in the Permian Basin.

Meanwhile, the Joint OPEC and Non-OPEC ministerial monitoring committee is also scheduled to meet Friday in Vienna to review compliance with the production-cut agreement. Back on Nymex, October gasoline edged up by less than a cent to $1.669 a gallon, while heating oil for the same month lost 1.9 cents, or 1.1%, to $1.780 a gallon. October natural gas rose 12.2 cents, or 4%, to $3.146 per million British thermal units, with prices marking the highest finish since late May.

Weather forecasts call for “large areas of above-average cooling demand across the central and eastern U.S. over the next week, though conditions are projected to return to normal levels on a 7-14 day outlook,” said Fraser.

Have a great day,

Loren R. Bailey, President
Fuel Manager Services Inc

Office: 479-846-2761
Cell: 479-790-5581