Oil Futures End the Week Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended mixed with a downside bias Friday afternoon, with the spot-month West Texas Intermediate crude oil contract bouncing off a six-year low to end with modest gains.

The September WTI contract earlier in the session fell to its lowest level since March 2009 amid worries about weak economic data and softening demand while the market remains oversupplied.

Domestically, gasoline demand is expected to weaken as we move into September, with peak summer driving typically ending on Labor Day, which will be observed this year on Sept.7. Shortly thereafter, an increasing number of refineries will cut runs as they take down units for seasonal maintenance during the autumn.

China’s devaluation of its currency this week highlighted the market’s concern about a slowdown in the world’s second largest economy that would reduce oil demand, adding to the bearish sentiment that has overtaken the oil futures market.

Data released Friday showed July wholesale prices rose less than expected in the United States while early year growth momentum in the eurozone economy slowed during the second quarter.

However, technical support for NYMEX WTI held above $42 bbl at settlement, so the market could use that as a springboard to rebound next week should speculation of a delayed rate hike by the U.S. Federal Reserve increase, said analyst Phil Flynn at Price Futures. An increasing number of analysts had thought the Fed would raise the key federal funds rate in September after holding interest rates between zero and 25 basis points since 2008. Yet, slowing economic growth in Europe and China might prompt the Fed to hold back on lifting interest rates, said Flynn.

NYMEX September WTI crude futures settled up 27 cents to $42.50 bbl while ending the week down $1.37. The contract traded down to a fresh 6 1/2-year low on the spot continuation chart of $41.35 Friday before reversing higher.

ICE September Brent futures eased 19 cents to $49.03 bbl at expiration this afternoon, while up 42 cents for the week. October Brent futures settled down 44 cents at $49.19 bbl. The Brent premium over WTI narrowed 46 cents to $6.53 bbl.

In products trade, the NYMEX September ULSD futures contract eased 1.08 cents to a $1.5579 gallon at settlement, off a one-week low of $1.5306 while 1.43 cents higher on the week. The September RBOB futures contract tumbled 2.72 cents to a $1.6869 gallon settlement, moving off a three-day low of $1.6706 while 6.39 cents higher on the week.

On Wall Street, U.S. equities were heading for a higher close after seesawing most of the session, with the dollar edging up versus a basket of six major foreign currencies.

Oil futures came under pressure after Baker Hughes said in its weekly rig count report issued today rigs drilling for oil in the United States rose by two to 672 this week.

Globally, oil production is strong and could increase once sanctions are lifted on Iran, allowing Tehran to increase its exports by early next year.

The Energy Information Administration in its Short-term Energy Outlook issued on Tuesday estimated non-OPEC production growing at 1.4 million bpd this year and remain flat in 2016 due to reduced investment. EIA also forecasts OPEC crude oil production to increase by 800,000 bpd in 2015 and remain relatively flat in 2016.

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