Oil Futures End Mixed Friday
NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed with an upside bias at the close of trade for the first week of 2017, boosted by signs several of the world's leading oil producing nations are complying with their pledge to tamp down output. The gains, however, were capped by a stronger dollar, an increase in the number of oil rigs in the United States and reports of higher supply from Iran and Iraq.
Saudi Arabia has cut January exports by 486,000 barrels per day (bpd) as it agreed to do in November as part of the Nov. 30 agreement by the Organization of Petroleum Exporting Countries. The Kingdom is reportedly considering cutting output further, with reports suggesting they expect to reduce February loadings by as much as 740,000 bpd.
In addition, Kuwait, Abu Dhabi and United Arab Emirates have indicated they are cutting their production in line with the Nov. 30 agreement that requires OPEC to cut output by 1.2 million bpd to 32.5 million bpd during the first half of 2017. Eleven non-OPEC oil producing countries also agreed to cut a combined 558,000 bpd per their Dec. 10 agreement.
Oil futures dipped briefly early on reports Iran has sold more than 13 million bbl of oil that it held on offshore tankers, capitalizing on an OPEC output cut deal from which it is exempt to regain market share.
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In addition, OPEC member Libya, which is exempt from the agreement, is expected to boost output to 1.9 million bpd after restarting its massive Sahara oilfield. Libya currently produces nearly 700,000 bpd, with its production curbed by militant attacks.
In the United States, the number of active rigs drilling for oil rose by four this week to 529, a tenth consecutive weekly increase and the most in operation since Dec. 31, 2015, Baker Hughes, Inc. reported. The count is up 85 rigs since the start of November, and is 13 higher than the same week a year ago.
On the economic front, payroll data from the Labor Department showed the U.S. labor market is resilient, which could boost oil consumption. The report said the economy added 156,000 jobs last month while the unemployment rate rose 0.1% to 4.7%. Hourly wages grew by 0.4% in December and 2.9% year-over-year, the highest since 2009 and up from 2.5% for November. Strong wage growth is linked to increased consumer spending and inflation.
This comes as a storm packing heavy snow, sleet and freezing rain hit Southern states on Friday, with wintry weather conditions now projected to come to the Northeast region that would boost heating oil demand.
Analysts said the dollar strengthened after the payroll report, offering the Federal Reserve wiggle room to continue raising its federal funds rate, with the stronger dollar limiting the upside for oil futures today.
Also, comments from Chicago Federal Reserve President Charles Evans, a voting member of the Fed's policy committee and one of the outspoken doves, signaled the Fed is getting ready for quicker rate hikes in the face of strong economic growth and rising inflation.
At settlement, NYMEX February West Texas Intermediate crude futures were 23 cents higher at $53.99 per barrel (bbl), off $54.32 a three-day high while up 27 cents for the week. ICE March Brent gained 21 cents to $57.10 bbl, off a $57.47 three-day high while up 28 cents for the week.
Products were little changed with NYMEX February ULSD futures 0.90 cent higher at $1.7032 gallon, trimming an advance to a three-day high of $1.7146 while a tad lower for the week. February RBOB futures eased 0.37 cent to a $1.6340 gallon settlement, reversing off a $1.6583 three-day high while down 3.11 cents for the week.
George Orwel can be reached at george.orwel@dtn.com
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