Oil pared a weekly decline as new economic data brightened the outlook for rebalancing supply and demand.
Futures rose 0.7 percent in New York, trimming a weekly drop to 0.6 percent on the heels of the year’s biggest rally of 8.6 percent last week. While U.S. crude production hovers at the highest level since July 2015 and output from the Organization of Petroleum Exporting Countries last month climbed, sliding stockpiles and an outlook for improved demand growth are lending to a more positive sentiment. The U.S. economy continued to close the jobs gap with strong July payrolls.
“The good jobs report made people think that the economy is still going strong and demand will be rebalancing the market faster than expected,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone.
The U.S. benchmark settled above $50 a barrel earlier this week for the first time since May. Last week’s rally was driven by shrinking stockpiles in the U.S., where fuel demand is peaking amid the summer driving season that is due to end next month. While the Organization of Petroleum Exporting Countries and its allies work to rebalance the market, Russia says it has kept current output levels from May and plans to do so until the OPEC production-cut pact expires.
West Texas Intermediate for September delivery added 35 cents to $49.38 a barrel at 12:18 p.m. on the New York Mercantile Exchange. Total volume traded was about 2 percent below the 100-day average.
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Brent for October settlement gained 28 cents to $52.29 a barrel on the London-based ICE Futures Europe exchange. Prices are down 0.4 percent this week after a 9.3 percent surge in the period ended July 28. The global benchmark crude traded at a premium of $2.73 to October WTI.
U.S. oil output expanded by 20,000 barrels a day to 9.43 million a day, according to a report from the EIA earlier in the week. Nationwide crude stockpiles have declined the past five weeks and fuel demand jumped by 21,000 barrels a day to 9.84 million last week, a record-high.
The strength in motor fuel demand could end after the summer driving season, according to Gene McGillian, market research manager at Tradition Energy in Stamford, Connecticut. “To really push above $50, we need to see signs that this isn’t seasonal strength in the market,” he said.
- U.S. crude exports averaged about 786,400 barrels a day in June versus about 1.02 million barrels a day in May, falling to a six-month low, according to Bloomberg calculations of U.S. Census Bureau data released Friday.
- Shale explorers from Pioneer Natural Resources Co. to Devon Energy Corp. are among drillers amassing hedges that protect their future proceeds as far out as 2023, according to data compiled by Bloomberg.
— With assistance by Ben Sharples, and Rakteem Katakey