Oil Futures End Sharply Higher Friday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled sharply higher Friday afternoon, rallying on bullish comments by U.S. Federal Reserve officials, a drop in U.S. oil rigs and supply, and the prospect of a deal late next week to freeze production by leading oil producers overseas.

Refined products were additionally boosted by a fire that caused a refinery outage in Houston this morning.

NYMEX May West Texas Intermediate crude oil futures settled $2.46 or 6.6% higher at $39.72 bbl, edging off a $39.84 one-week high while up $2.93 or 8.0% for the week.

June Brent crude futures on the IntercontinentalExchange rallied $2.51 or 6.4% to $41.94 bbl at settlement, off a two-week spot high of $42.01 while up $3.27 or 8.5% for the week.

In spread trade, the Brent premium firmed to $2.22 bbl and near a three-week high.

NYMEX May ULSD futures spiked 7.47cts or 6.6% to $1.2004 gallon, off a better than one-week spot high of $1.2075, while up 6.87cts or 6.1% for the week. May RBOB futures climbed 8.25cts or 6.0% to a $1.4637 gallon settlement and near a $1.4666 one-week high, while up 6.21cts or 4.4% for the week.

"The [oil] price strength itself is directing attention onto any supportive fundamental aspects of the market, such as the decline in U.S. drilling and production, but with no fresh developments in either of those established trends," said analyst Tim Evans at Citi Futures. "Sentiment is also swinging back to a more bullish view of the upcoming April 17 producer freeze talks in Doha."

Crude oil futures have had a whipsaw move throughout the week as market participants sought clarity on whether the Organization of Petroleum Exporting Countries would agree to keep a lid on supply while data showed U.S. crude stocks were drawn down for the first time in eight weeks.

Russia's oil minister said Friday that an agreement is likely to be reached with OPEC to freeze output at January levels during a meeting on April 17 in Doha, Qatar. The freeze plan was designed earlier this year by Russia and Saudi Arabia. However, the Saudis have recently said they won't freeze without Iran doing the same while Iran has said it is ramping output to its pre-sanction's level, having only won relief from the sanctions in January.

Also bolstering oil futures was another cold blast in the U.S. Northeast, a decline for weekly U.S. crude oil supply and summer maintenance in the North Sea oil fields that would take some oil supply out of the global market.

The Energy Information Administration on Wednesday reported U.S. crude oil production fell 14,000 bpd to 9.008 million bpd in the week-ended April 1, and commercial crude stocks unexpectedly fell for the first time in eight weeks, drawn down 4.9 million bbl to 529.9 million bbl.

Oil services firm Baker Hughes said there were 354 rigs drilling for oil in the week-ended today, down eight from last week and the lowest level since Nov. 6, 2009 when the count was 332.

Fed Chair Janet Yellen's comments also stirred optimism. Yellen said late Thursday the U.S. economy is on sound footing with hints of inflation, and the U.S. labor market was close to full strength.

This morning, New York Fed President William Dudley supported the cautious approach by the Fed in raising rates while expecting domestic growth that, in turn, supports demand for oil.

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