Oil Settles Shallowly Mixed Friday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled shallowly mixed Friday afternoon, capping a volatile trade week that saw the oil complex tracking the whipsaw move by the broader equities market and reacting to increased crude supply and doubts over demand growth.

Renewed optimism over Greece and a two-day rebound by China’s stock market drove most of the oil futures trade today, fuelling a short-covering rally in U.S. equities and commodities ahead of the weekend break, with blue-chip Dow Jones Industrial Average posting triple-digit gains.

Oil futures were also buoyed by a weakening U.S. dollar and the protracted Iran nuclear talks, while the International Energy Agency’s bearish supply and demand outlook kept in check the upside for the complex, analysts said.

“The dollar has weakened amid optimism that that European Union leaders meeting Sunday may accept the latest Greek debt proposals, reducing if not eliminating the risk of default,” said analyst Tim Evans at Citi Futures in New York. “Crude oil initially firmed in sympathy, but then tipped back into negative territory, presumably capped by IEA report.”

Others agreed.

“We are optimistic about a Greek deal and pessimistic over an Iran deal, but both have provided more drama than we would have liked,” said analyst Phil Flynn at Price Futures Group in Chicago.

This has been a rollercoaster trade week, with traders having to contend with a range of diverse factors.

At settlement, the NYMEX August WTI crude contract was down 4 cents at $52.74 bbl, off a four-day spot high of $53.89. The contract seesawed widely this week, including a plunge to a $50.58 three-month low on the spot continuation chart Tuesday, erasing $4.19 or 7.4% of its value since July 2.

The ICE August Brent crude futures contract settled up 12 cents at $58.73 bbl, off a four-day spot high of $57.86. The contract posted a steep $3.34 weekly loss. The decline by WTI outpaced that of Brent’s, with the Brent premium over WTI widening by the most in seven weeks to $5.99 bbl, up from $5.83 at Thursday’s settlement.

The NYMEX August ULSD contract settled up 0.39 cents at $1.7399 gallon, off a four-day spot high of $1.7612 while down 10.0 cents for the week. The NYMEX August RBOB contract eased 2.86 cents to a $2.0165 gallon settlement after inside trade, while down 1.78 cents for the week.

On Wall Street, equities were higher, tracking gains in European and Asian bourses while the dollar fell to a ten-day low vs. other world currencies including the euro despite Federal Reserve Chair Janet Yellen, suggesting the federal funds rate may be raised this year barring unexpected bad data.

Yellen said many of the factors underlying U.S. economic activity were solid and that the labor market would continue to improve. The market took her comments as hawkish.

In Vienna, Friday’s deadline for a deal in the Iran nuclear talks was missed as diplomats have failed to reach a permanent agreement. That means Congress will now take 60 days to review any eventual deal, delaying the lifting of sanctions and a hike in Iran's oil exports.

On fundamentals, IEA forecasts the growth in the global consumption of oil would slow in 2016 to 1.2 million bpd from a projected growth rate of 1.4 million bpd this year. The year-on-year increase in new oil demand peaked in the first quarter.

The report highlighted the dichotomy between OPEC and non-OPEC supply, saying new non-OPEC supply growth would "grind to a halt" in 2016 while OPEC output hit a three-year high in June

George Orwel can be reached at george.orwel@telventdtn.com