Oil caps best week since July as de­mand fore­casts im­prove

Muscat Daily - - BUSINESS -

Lon­don, UK - Oil had its big­gest weekly gain since late July as Texas re­finer­ies re­cov­er­ing from Hur­ri­cane Har­vey pro­cessed more crude and global de­mand fore­casts bright­ened.

Fu­tures rose 5.1 per cent this week in New York, set­tling just be­low the US$50-a-bar­rel thresh­old that’s kept the in­dus­try in thrall. The in­crease was buoyed by higher de­mand fore­casts from the In­ter­na­tional En­ergy Agency (IEA) and ex­pec­ta­tions OPEC and its part­ners will ex­tend out­put cuts beyond the March ex­pi­ra­tion date of their deal.

“The nar­ra­tive in the mar­ket is that de­mand has re­ally picked up,” said John Kil­duff, a part­ner at New York-based hedge Again Cap­i­tal. “As a re­sult, we’ve got- ten this push higher.”

Nearly a quar­ter of US re­fin­ing ca­pac­ity was shut­tered in the wake of Har­vey. Two weeks later, only three Gulf Coast re­finer­ies re­main shut, ac­cord­ing to the Depart­ment of En­ergy. The rest - in­clud­ing Mo­tiva En­ter­prises’s Port Arthur re­fin­ery, the na­tion’s largest - are grad­u­ally com­ing back on­line, help­ing boost crude de­mand.

At the same time, the Paris­based IEA said on Wed­nes­day it ex­pects global de­mand to climb this year by the most since 2015 while OPEC and its part­ners were said to be dis­cussing an ex­ten­sion of its deal to cut out­put beyond its March ex­pi­ra­tion.

“Peo­ple are look­ing for the price to go ahead and set­tle above US$50 a bar­rel, but they need some more than just the cur­rent news,” said Michael Lynch, pres­i­dent of Strate­gic En­ergy & Eco­nomic Re­search.

West Texas In­ter­me­di­ate fu­tures for Oc­to­ber de­liv­ery ended the ses­sion on the New York Mer­can­tile Ex­change at $49.89, un­changed from the high­est close since July 31 on Thurs­day.

Brent for Novem­ber set­tle­ment closed 15 cents higher at $55.62 a bar­rel on the Lon­don­based ICE Fu­tures Europe ex­change. Prices ad­vanced 3.4 per cent this week. The global bench­mark crude traded at a pre­mium of $5.18 to Novem­ber WTI.

Mean­while, the US oil rig count fell for the fourth time in five weeks, ac­cord­ing to Baker Hughes data re­leased Fri­day. Rigs de­creased by seven to 749. The de­cline in­cluded drops in Texas’ Per­mian and Ea­gle Ford shale basins.

“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.”

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