Oil futures fell Friday ahead of a meeting in Doha Sunday in which major oil producers are expected to discuss a potential output freeze agreement.
NYMEX May crude settled down $1.14 at $40.36/b. ICE June Brent settled 74 cents lower at $43.10/b.
NYMEX May ULSD settled down 2.21 cents at $1.2322/gal. NYMEX May RBOB settled down 4.44 cents at $1.4612/gal.
Iran's Oil Ministry said Friday that the country will not agree to freeze production, and that its oil minister will skip the meeting, causing further skepticism the Doha summit can deliver a meaningful result.
A delegation headed by Iran's OPEC governor will attend the Doha summit to "announce Iran's position," the ministry said.
Iran has pledged to increase output to a pre-sanctions level of 4 million b/d. The most recent Platts survey of analysts and industry officials pegged Iranian output at 3.23 million b/d in March.
ICE Brent's June/July spread remained backwardated for a second straight day at 4 cents/b. Two weeks ago, that spread was in a 42 cent/b contango.
Upcoming North Sea maintenance is likely the main reason why ICE Brent's nearby spreads have flipped from contango to backwardation, according to analysts and traders.
A suddenly tight ULSD market in Northwest Europe could be contributing to ICE Brent's backwardation, as refiners bid up prompt crude prices in order to churn out more products and satisfy demand.
The premium for delivered cargoes of ULSD in Northwest Europe rallied to a five-month high Friday. CIF cargoes were assessed $1.75 higher at $7.50/mt above front-month ICE low sulfur gasoil futures, highest since October.
This comes despite the fact that inventory levels in the Amsterdam-Rotterdam-Antwerp hub are well above historical averages. A contango structure could be delaying selling as a financial incentive exists to keep product in storage.
NYMEX crude's nearby spread has also strengthened, but remains in a contango. The May/June spread widened 18 Friday to minus $1.35/b.
The closure of the Keystone Pipeline earlier this month helped narrow the NYMEX crude spreads, though backwardation does not look like it is on the horizon, Tyche Capital investment manager Tariq Zahir.
After reaching 2016 highs earlier this week, crude futures appeared overextended, which could have triggered selling pressure.
ICE June Brent was above its Bollinger Band upper limit Monday through Wednesday. The upper limit is calculated on a daily basis as two standard deviations above a contract's 20-day moving average.
The front-month contract traded as high as $44.05/b Friday, which was below its upper limit of around $44.9/b.
"Oil continues to test the limits of the upper bound of the recent trading range, but it looks unlikely to breakout to the upside in response to the Doha meeting," TD Securities said in a Friday note.
A drop in the number of active US oil rigs and a weaker dollar lent support to the oil complex.
The US oil rig count fell by 3 to 351 rigs, Baker Hughes said. It was the fourth straight decline, and marked the fewest rigs since November 2009.
The US Dollar Index was down Friday as much as 0.4 points to 94.5 points. On Tuesday, that index sank to 93.6 points, its lowest level since late August.
Chinese economic data was viewed as mixed. The country's GDP expanded at an annual rate of 6.7% in the first quarter of 2016.
"The good news is that growth remains elevated. The bad news is that growth is coming the old fashioned way, from debt and investment," Confluence Investment Management said in a note.
