Oil Futures Settle Higher Friday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Friday afternoon on short-covering ahead of the weekend break in trading, halting a three-day decline despite a bearish rig count report released early afternoon by oil service firm Baker Hughes, Inc.

"We appear to have stabilized as selling dried out at $47.01 [four-month] lows [on Wednesday]," said Tom Bentz, vice president of energy derivatives at ABN AMRO. "The market was negative early today but turned stronger despite the bearish rigs report, and as long as it holds at $47 we may establish a new trading range at $47 to $50 barrel (bbl)."

He added, "After the recent fund liquidation and now consolidation, I'm leaning towards another rebound because the bearish news is already priced in. The OPEC meeting on compliance over the weekend got the market optimistic something positive could come out of the meeting, and that's why you saw some short-covering at the end of the session."

A five-member committee made up of Russia and the Organization of the Petroleum Exporting Countries will meet Sunday, March 26, in Kuwait to discuss compliance with their nearly 1.8 million barrels per day (bpd) in production cuts agreed to in late 2016.

OPEC compliance was strong at 98% in February, the International Energy Agency recently said, but the non-OPEC compliance rate continues to lag and rising U.S. crude production and excess supplies have offset the OPEC cuts.

Russia and several OPEC producers have indicated that production cuts will need to be extended beyond the initial six-month term agreed to last year. Saudi Arabian oil minister Khalid al-Falih suggested they could support an extension of the cuts if global oil inventories remain above their five-year average.

Meanwhile, there was optimism after Republican House leaders pulled a healthcare bill, with equities cutting losses this afternoon. Markets were cagey earlier today on concern that failing to pass the healthcare bill could impact President Donald Trump's pro-growth agenda that has buoyed market sentiment in recent months. With the bill pulled, however, Congress can now turn to tax and financial reform that investors have been hoping for, analysts said.

May NYMEX West Texas Intermediate crude futures settled 27 cents higher at $47.97 bbl, down 81 cents for the week. IntercontinentalExchange May Brent crude futures gained 24 cents at $50.80 bbl while down 96 cents for the week.

In arbitrage trade, Brent closed $2.83 bbl over WTI, up 15 cents versus a week ago.

In products trade, NYMEX April RBOB futures gained 1.52 cents to $1.6048 gallon while little changed on the week. NYMEX April ULSD futures settled 0.75 cent higher at $1.4976 gallon, down 1.09 cents for the week.

Baker Hughes reported the number of rigs actively drilling for oil in the United States increased for the 10th straight week, up 21 during the week-ended today to an 18-month high of 652 and 280 more than a year ago.

The drilling report is the latest sign of rising U.S. production that along with record high U.S. crude inventories have prompted speculators to reduce length in NYMEX oil futures over the past two weeks.

The Energy Information Administration's latest report issued midweek showed crude production ramped up 20,000 bpd to a 9.129 million bpd better-than one-year high, with crude inventories increasing by 5.0 million bbl last week to a 533.1 million bbl a new record high.

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