Oil heads for best week since July as de­mand fore­casts im­prove

The Globe and Mail (Prairie Edition) - - GLOBE INVESTOR - MEENAL VAMBURKAR NEW YORK GRANT SMITH LON­DON

Oil

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.

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