Oil Futures End Higher on IEA Outlook

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended higher Friday afternoon on growing optimism about the prospect of a rebalanced market later this year after Baker Hughes said the number of oil rigs fell this week to a five-year low and both the International Energy Agency and Goldman Sachs suggested the worst may be over for the oil market.

"The oil market has gotten a lift from today's IEA monthly Oil Market Report that sees signs that prices might have bottomed out ... but the headlines seem more optimistic than the report itself," said Tim Evans, a Citi Futures energy specialist in New York.

Other analysts noted IEA's comments that oil supply and demand would probably rebalance in the second half of 2016. Meanwhile, a rally for equities boosted investor sentiment, with major indices up more than 1.0% because the European Central Bank's stimulus measures announced Thursday would boost the region's economy and oil demand.

NYMEX April West Texas Intermediate crude futures rose 66 cents to $38.50 per barrel (bbl) at settlement, off a $39.02 three-month high on the spot continuation chart. WTI futures posted a weekly gain of $2.58, or 7.2%, the fourth straight weekly advance.

May Brent crude futures trade on the IntercontinentalExchange rose 34 cents to a $40.39 bbl settlement, up $1.67 or 4.3% for the week, with Brent's premium over WTI narrowing 32 cents to $1.89 bbl.

In products trade, NYMEX April ULSD futures settled up 0.19 cents to $1.2180 gallon, off a three-day spot high of $1.2411 while posting a weekly gain of 5.67 cents or 4.9%. April RBOB futures edged up 0.53 cent to $1.4443 gallon at settlement, gaining 11.22 cents or 8.4% for the week.

On Wall Street, U.S. stock indices were heading for a higher close, while the dollar bounced off Thursday's one-month low.

Traders were glued to a raft of reports and comments about oil supply. Baker Hughes reported in midsession trade that there were 386 rigs drilling for oil, a decline of two on the week and the fewest number of rigs drilling for oil in the U.S. since the week-ended Dec. 4, 2009, when the count was 383.

Earlier, IEA revised down by 100,000 barrels per day (bpd) its outlook for oil production this year for non-OPEC producers from its forecast in February, projecting non-OPEC output to decline 750,000 bpd this year to 57.0 million bpd.

In February, global oil supply declined 180,000 bpd from January to 96.5 million bpd with lower production from OPEC and non-OPEC producers. Still, oil production was 1.8 million bpd above year prior, with a slight year-on-year decline in output by non-OPEC more than offset by production growth from OPEC.

Crude oil production by OPEC in February declined 90,000 bpd to 32.61 million bpd despite a "substantial rise in flows from post-sanctions Iran," said IEA.

In a separate report, IEA said the price of Brent crude might have reached a bottom in mid-January at $28.50 bbl, but added the price recovery from the low "should not, however, be taken as a definitive sign that the worst is necessarily over."

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