Oil Ends Higher

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher for the sixth straight session, with West Texas Intermediate crude moving into a bull market while spot-month Brent crossed above $50 bbl for the first time since early July, as the dollar plunged and some of the world's top oil producers prepare to discuss a potential freeze in production levels.

Speculation the Organization of Petroleum Exporting Countries and non-OPEC would take action to stabilize oil prices next month intensified during the course of trade. However, some analysts remained skeptical, citing reports showing Saudi Arabia signaling it could boost crude supplies this month ahead of informal talks with other OPEC members at conference set for Sept. 26-28 in Algeria.

Oil futures also continued to find support from data released Wednesday by the U.S. Energy Information Administration that showed steep draws for crude and gasoline for the week-ended Aug. 12. EIA detailed a 2.5 million bbl crude stock draw, a 2.7 million bbl decline in gasoline supplies and a 1.9 million bbl build in distillate stockpiles occurred last week. Refinery crude inputs rose 268,000 bpd to 16.865 million bbl.

The six-day rally for WTI futures is the longest run-up this year, although analyst Jan Stuart of Credit Suisse said he expects WTI to trade in the range of $45 to $50 bbl for the rest of 2016 because he doesn't expect OPEC to cut or freeze production next month.

NYMEX September West Texas Intermediate crude futures settled $1.43 higher at $48.22 bbl, off a $48.38 better than six-week spot high. The October Brent contract on the IntercontinentalExchange gained $1.04 to a $50.89 bbl settlement, edging off a near eight-week spot high of $51.05.

In products trade, NYMEX September ULSD futures rallied 3.68cts to $1.5260 gallon, off a $1.5297 eight-week spot high. The NYMEX September RBOB futures contract climbed 3.92cts to $1.4897 gallon, off a seven-week spot high of $1.4923.

"We are officially in a bull market after rising 23% from August lows on a combination of a drop in [crude] inventories and expected OPEC talks," said analyst Phil Flynn at Price Futures in Chicago. "Also, a dip in demand that we thought would materialize as the summer peak driving season comes to an end hasn't materialized. Demand is still strong. Moreover, China was upgraded by Moody's, so we expect the [Chinese] economy to improve and demand as well."

Flynn noted the NYMEX September WTI crude contract expires at the close of trade Monday (8/22), and there was "massive short covering" on the contract during today's trade session, with the weakening dollar "feeding into the rally."

In currency trade, the U.S. dollar fell to a seven-week low after minutes from the Federal Reserve's last policy meeting in July showed a split within the central bank, but the majority said more data was needed before such a rate hike. The minutes were considered mildly dovish.

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