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“#Futures Movers: Oil prices tally a 5th straight weekly rise on demand optimism”
Oil futures climbed on Friday, on track for a fifth consecutive weekly gain as investors remain upbeat about demand amid a global economic recovery.
The reason for the “string of gains is pretty simple: global oil demand is coming back faster than supply,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. “U.S. oil production is sputtering and OPEC seems reluctant to add too many barrels even if it is clear that the global oil market is begging for more.”
CL00,
CLQ21,
rose 29 cents, or 0.4%, to $73.59 a barrel on the New York Mercantile Exchange, leaving the U.S. benchmark on track for a more than 3% weekly rise, based on the front-month contracts.
Global benchmark Brent crude’s September contract
BRN00,
BRNU21,
which is the most active, was up 4 cents, or 0.05%, at $74.85 a barrel on ICE Futures Europe, while the front-month August contract
BRNQ21,
added 9 cents, or 0.1%, to $75.65 a barrel. Brent was headed for a 2.9% weekly rise.
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“Sentiment and price momentum remain extremely positive,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
Crude dipped in Thursday’s session after a report that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, could move next week to further boost output by 500,000 barrels a day beginning in August, building on the planned production rise of 800,000 barrels a day in July, Weinberg said.
But the pressure proved short-lived, he said, because an expansion of supply “is by no means likely to throw the market off track — as yesterday’s market response illustrates,” he said. “If anything, it will not even be enough given that the oil market risks being undersupplied to the tune of 1.4 million barrels per day in the second half of the year.”
OPEC+ members are expected to make their decision on production levels during their official meeting on Thursday, July 1.
“Demand is coming back fast and furious, faster than the naysayers thought was even possible,” said Flynn.
“We are going to see oil demand hit an all-time record high globally probably next year, and the sad part about it is that we might not have the capacity to meet that growing demand,” he added.
Meanwhile, the discount for WTI versus Brent has narrowed sharply, from more than $4 a barrel in late April to a little over $2.25 now, underlining the strength of U.S. demand, said Michael Tran, analyst at RBC Capital Markets, in a note.
U.S. demand “demand is recovering at a faster rate than other regions,” he wrote.
“Improving demand this spring led to firmer refining margins relative to global regions, which catapulted runs. With rapidly tightening U.S. balances, strength in WTI relative to Brent helps to both incentivize global imports and choke off crude exports,” Tran said.
There may be room for further narrowing of the WTI/Brent spread, since markets often overshoot, he said, but noted that inbound crude shipments are running at their highest pace so far this year.
Back on Nymex, prices for petroleum products edged lower, but poised to end the week higher. July gasoline
RBN21,
fell 0.4% to $2.27 a gallon, with prices up nearly 4.8% for the week. July heating oil
HON21,
traded down by 0.3% at $nearly $2.16 a gallon , on track for a weekly climb of 3%.
July natural gas
NGN21,
which expires at the end of Monday’s session, traded at $3.46 per million British thermal units, trading up 1.3% for the session and looking at a weekly climb of 7.7%.
By
Myra P. Saefong and
William Watts
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