Commodities - Crude Oil Settles Higher, Best Performance in 7-Weeks

Lloyd Doyle
September 17, 2017

The spread was firmly in contango between June 1 and Wednesday. "And the persistent strength in the global economy is finally registering".

The prompt November/December spread for the European benchmark contract has been mostly strongly backwardated since mid-August.

Futures rose 5.1 percent in the past week in NY, settling just below the $50-a-barrel threshold that's kept the industry in thrall.

Although supply still exceeds demand, indications are that the oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in both Opec and non-Opec countries.

Latest reports from OPEC and the International Energy Agency both revised oil demand growth for 2017 upwards, which boosted market sentiment, analysts said.

With Hurricane Harvey negatively impacting output, the Federal Reserve released a report on Friday unexpectedly showing a notable decline in USA industrial production in the month of August.

"OPEC said that it sees signs of higher demand and tightening supplies".

"OECD demand growth continues to be much stronger than expected, particularly in Europe and the United States", the IEA said.

"On the USA side, steadily declining rig counts of late have raised the possibility of stalled US production gains, with current output still holding below pre-Harvey levels", said Robbie Fraser, commodity analyst at Schneider Electric (PA:), in a note.

Gasoline inventories, according to the EIA fell last week, by 8.4 million barrels, generally in tune with API's estimate of a 7.896-million-barrel decline-and the largest gasoline draw on record.

The post-Harvey refinery recovery is underway, however, as data earlier in the week from IHS Markit indicated that 13 of 20 affected USA refineries were restarting operations.

"In our opinion, the medium-term price trend will be influenced more by whether, and how, USA production continues to rise - recently it fell short of expectations", said analysts from Commerzbank in a note Thursday.

They remain convinced of longer-term upside to crude prices.

On the data front, the number of rigs operating in US oil fields fell by seven to a total of 756 rigs this week, according to data released by oilfield service firm Baker Hughes on Friday.

"The Saudis have really been working the crowd, pressing Libya, pressing Nigeria", Mr. Kilduff said.

Other reports by Iphone Fresh

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