Oil heads for best week since July as demand forecasts improve
has posted its biggest weekly gain since late July as Texas refineries recovering from Hurricane Harvey processed more crude and global demand forecasts brightened.
Futures for October delivery settled at $49.89 (U.S.) a barrel on the New York Mercantile Exchange for a 5.1-per-cent advance on the week. Total volume traded was about 20 per cent above the 100-day average. OPEC and the International Energy Agency buoyed crude markets with higher demand forecasts that signalled the glut that’s weighed on prices may contract further. Refiners hobbled by Harvey’s record rainfall continued firing up plants forced to shut or curtail operations as floodwaters rose.
“The narrative in the market is that demand has really picked up,” said John Kilduff, a partner at New York-based hedge Again Capital LLC. “As a result, we’ve gotten this push higher.”
While oil has rebounded the past two weeks, prices have struggled to hold above the $50 mark as U.S. shale drillers ramped increased output, offsetting supply curbs by the Organization of Petroleum Exporting Countries, Russia and other partners. The Saudi Arabian-led cartel and allies are said to be discussing extending those cuts beyond their March expiration.
“The Saudis have really been working the crowd, pressing Libya, pressing Nigeria,” Mr. Kilduff said. “And the persistent strength in the global economy is finally registering.”
Brent for November settlement increased 21 cents to $55.68 a barrel on the London-based ICE Futures Europe exchange. Prices advanced 3.6 per cent this week. The global benchmark crude traded at a premium of $5.25 to November WTI.
Global demand will climb this year by the most since 2015, the Paris-based IEA said on Wednesday. A day earlier, OPEC raised its estimates for the amount of crude it will need to supply in 2018 on expectations of stronger consumption from Europe and China.
“The feel-good factor appears to have returned to the oil market,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “Underpinning the prevailing sentiment is the positive afterglow of this week’s frenzy of bullish oil demand forecasts from the leading energy agencies.”
The spread between Brent and WTI will narrow in coming weeks as U.S. refining capacity recovers from the disruption by Hurricane Harvey, according to Fitch’s BMI Research.