Oil futures climbed on Friday to tally a fifth consecutive weekly gain as investors remained upbeat about demand amid a global economic recovery.
The reason for the “string of gains is pretty simple: global oil demand is coming back faster than supply,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. “U.S. oil production is sputtering and OPEC seems reluctant to add too many barrels even if it is clear that the global oil market is begging for more.”
West Texas Intermediate crude for August delivery
rose 75 cents, or 1%, to settle at $74.05 a barrel on the New York Mercantile Exchange, lifting the U.S. benchmark by 3.9% for the week, based on the front-month contracts. Prices marked the highest finish since Oct. 9, 2018, according to Dow Jones Market Data.
Global benchmark Brent crude’s September contract
which is the most active, climbed 57 cents, or 0.8%, to $75.38 a barrel on ICE Futures Europe, while the front-month August contract
added 62 cents, or 0.8%, to $76.18 a barrel, settling at the highest since Oct. 29, 2018. Brent finished with a 3.6% weekly rise.
“Sentiment and price momentum remain extremely positive,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
Crude dipped in Thursday’s session after a report that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, could move next week to further boost output by 500,000 barrels a day beginning in August, building on the planned production rise of 800,000 barrels a day in July, Weinberg said.
But the pressure proved short-lived, he said, because an expansion of supply “is by no means likely to throw the market off track — as yesterday’s market response illustrates,” he said. “If anything, it will not even be enough given that the oil market risks being undersupplied to the tune of 1.4 million barrels per day in the second half of the year.”
OPEC+ members are expected to make their decision on production levels during their official meeting on Thursday, July 1.
Even if OPEC+ agrees to raise output in August, “it may prove insufficient to meet the anticipated rise in demand,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch. “Global stocks have already been tightening and that is now also true in the U.S.,” he said.
The oil market could “react to surprises out of OPEC+ in the runup to the meeting, either in terms of an unusually large increase in quotas from August 1, or a small rise or no increase,” said Steeves.
Meanwhile, the discount for WTI versus Brent has narrowed sharply, from more than $4 a barrel in late April to a little over $2.25 now, underlining the strength of U.S. demand, said Michael Tran, analyst at RBC Capital Markets, in a note.
U.S. demand “demand is recovering at a faster rate than other regions,” he wrote.
“Improving demand this spring led to firmer refining margins relative to global regions, which catapulted runs. With rapidly tightening U.S. balances, strength in WTI relative to Brent helps to both incentivize global imports and choke off crude exports,” Tran said.
There may be room for further narrowing of the WTI/Brent spread, since markets often overshoot, he said, but noted that inbound crude shipments are running at their highest pace so far this year.
Back on Nymex, prices for petroleum products finished lower Friday, but ended the week higher. July gasoline
fell nearly 0.8% to $2.26 a gallon, with prices up 4.4% for the week. July heating oil
lost 0.6% at $2.15 a gallon, for a weekly climb of 2.7%.
July natural gas
which expires at the end of Monday’s session, settled at $3.50 per million British thermal units, up 2.3% for the session to notch the highest finish since January 2019. Prices saw a weekly climb of 8.7%.