Oil Ends the Week Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended mixed Friday afternoon after seesawing on either side of Thursday's settlements early in the session, initially declining after Baker Hughes Inc. reported the eighth straight weekly increase in the number of operating oil rigs in the United States. However, the spot-month West Texas Intermediate crude contract staged a late session short-covering rally to reach a higher settlement for the seventh straight day.

"Momentum is still on the upside despite the Baker Hughes rig count data, which suggests to me that people are still trying to get out of short positions, which, in turn, is typical of a bull market," said Phil Flynn, a senior analyst at Price Futures. "Moreover, Demand is still stronger than people thought."

Baker Hughes detailed rigs for oil and gas drilling climbed 10 to 491 this week, with the number of active oil rigs up 10 to 406.

NYMEX September West Texas Intermediate crude futures settled 30cts higher at $48.52 bbl, edging off a $48.75 six-week spot high, and up $4.03 or 9% for the week. WTI remains in bull market territory, up 24.4% from the Aug. 3 low of $39.19. The September contract expires Monday (8/22). October WTI futures settled 22cts higher at $49.11 bbl.

The October Brent contract on the IntercontinentalExchange was little changed, setting down a penny at $50.88 bbl after reversing off a two-month spot high of $51.22. The Brent contract lost $3.91 or 8.3% this week.

NYMEX September ULSD futures was also little changed, down 0.64cts at $1.5196 gallon at settlement, reversing off a $1.5324 seven-week spot high while posting a weekly gain of 11.1cts or 7.9%. NYMEX September RBOB futures rallied 2.32cts to $1.5129 gallon settlement, off a six-week spot high of $1.5158. The RBOB contract gained 14.2cts or 10.4% for the week.

Today's early weakness for WTI was underpinned by a stronger dollar.

However, the market's short position continued to dominate trade. And, speculation the Organization of Petroleum Exporting Countries and non-OPEC might take action on production in an effort to stabilize oil prices when they meet next month is adding to the buying activity, Flynn added.

Oil prices rallied sharply since Aug. 8 following the announcement of informal talks in Algeria on Sept. 26-28 between OPEC and non-OPEC producers including Russia. While saying an agreement to cut production was unlikely, Nigerian Oil Minister Emmanuel Ibe Kachikwu said Thursday that all options are on the table, including freezing output at a level to further discussed.

"Some are also noting that freezing output at current levels would be less supportive than it would have been in April, when OPEC output was lower," said energy specialist Tim Evans at Citi Futures in New York.

On Wall Street, equities were lower this afternoon while the dollar reversed up from a seven-week low after San Francisco Federal Reserve Bank President John Williams and his New York counterpart Bill Dudley called for a hike in federal funds rate sooner rather than later because they say the domestic economy is strong enough to withstand a higher rate.

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