Oil Ends the Week Lower

NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures settled lower Friday afternoon on concerns over another increase in the number of rigs activated for domestic oil drilling, technical pressure and book-squaring ahead of the weekend break.

"We pulled back after [WTI] failed to take out resistance at $55 plus the increase in rig count and equities came off…there were a lot of uncertainties that resulted in profit-taking," said analyst Phil Flynn at Price Futures in Chicago.

"[There was also] moderate volume book-squaring ahead of the weekend and ahead of upcoming Feb. 28 expirations in April Brent, March heating oil, and March RBOB gasoline," said Tim Evans at Citi Futures in New York.

Technically, there is a strong resistance for the spot-month NYMEX West Texas Intermediate futures at $55 bbl and for spot-month Brent futures on the IntercontinentalExchange at $58 bbl, with support at $50 and $53, respectively, said analysts.

April WTI futures fell 46cts to $53.99 bbl settlement, while posting a weekly gain of 59cts. April Brent eased 59cts to $55.99 bbl at settlement, up 18cts for the week. The Brent premium over WTI or Brent/WTI spread fell 41cts on the week to $2.00 at the close today.

In products trade, NYMEX March ULSD futures settled 1.63cts lower at $1.6404 gallon and little changed for the week, and NYMEX March RBOB futures fell 1.38cts to $1.5148 gallon settlement, down 0.18cts for the week

Baker Hughes, Inc. reported that the number of active oil rigs in the United States rose by five this week to 602, a sixth straight weekly build to the highest level since early October 2015, with a total of 77 oil rigs added so far this year.

This comes a day after the Energy Information Administration reported that domestic crude production climbed 24,000 bpd to a 9.001 million bpd 10-month high last week, while crude demand fell 187,000 bpd as refinery run rates fell 1.1% to 84.3% of operable capacity.

In addition, the EIA said U.S. crude inventories rose by 563,000 bbl in the week-ended Feb. 17, the seventh straight weekly crude stock build that boosted total supply to 518.7 million bbl, and 9% above year prior levels.

The federal report was bearish for crude but bullish for oil products, which saw their inventories posting massive draws while demand surged for the week, with year-over-year demand down 9.5% for gasoline but up 16% for distillates.

The relentless increase in domestic supply fueled doubts about whether the Organization of Petroleum Exporting Countries will succeed in its goal to rebalance the market or whether they will stay united in their efforts to cut 1.2 million bpd during the first half of 2017.

Iran has already signaled that oil prices have peaked at $55 bbl for WTI futures and $58 for ICE Brent futures. Any price above these could make OPEC oil less competitive in the global market and could even lead to demand destruction, Tehran warned.

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