Oil Futures Settle About $50

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures advanced for the third straight day Thursday afternoon, with nearest delivered West Texas Intermediate crude futures settling above the $50-per-barrel (bbl) mark for the first time in three weeks on light volume follow-through trade from Wednesday's rally.

Thursday's rally was also linked to book-squaring ahead of Friday's expirations for IntercontinentalExchange May Brent crude oil and NYMEX April oil products contracts, said New York-based Citi Futures analyst Tim Evans, adding, "There may be some end-of-the-month and end-of-the-quarter book squaring in the flow as well."

Analysts highlighted the psychological implication of this week's WTI rally.

"WTI closing above $50 is very significant from both psychological and technical standpoints," said analyst Phil Flynn at Price Futures in Chicago, and he added, "Most people thought we were heading for $40, but here we are back to the old trading range."

David Thompson, executive vice president at the Washington, D.C.-based Powerhouse brokerage firm, thinks "what is more important is that the uptrend line from the low at the beginning of August 2016 was tested during the most recent pullback at roughly around the $47 level. The fact that we have bounced higher off that test is the technically important development at this point. So, yes $47 is a significant support for WTI."

May NYMEX WTI futures were 84 cents higher at a $50.35 bbl settlement, ending near a $50.47 three-week high on the spot continuation chart. May WTI is holding a 43-cent discount to the June contract.

The oil futures rally was fueled by data from the Energy Information Administration issued Wednesday showing strong U.S. fuel demand, a disruption in Libyan oil supply, and reports that talks are underway for an inclusive extension of the 1.2 million barrels per day (bpd) in oil production cuts by Organization of Petroleum Exporting Countries.

In its report covering the week-ended March 24, EIA showed demand for gasoline jumped 3.0% year-over-year to 9.524 million bpd, with demand for distillates soaring 9.7% year-over-year to 4.222 million bpd.

Refinery crude inputs, which measures crude demand, soared 425,000 bpd to 16.2 million bpd last week, as refinery runs jumped nearly 2% to 89.3% for the week reviewed.

A consensus is also emerging among OPEC and non-OPEC producers for an extension of their nearly 1.8 million bpd in oil output cuts through the rest of the year and more OPEC members could join the quota system, according to a Bloomberg News report.

OPEC members Iran and Libya now exempt from the current quota would join the new agreement that could mean deeper output cuts by OPEC than the current 1.2 million bpd. OPEC members will meet on May 25 to make their decision on whether to extend the cuts.

ICE May Brent crude futures added 54 cents for a $52.96 bbl settlement, ending near a three-week high of $53.10, with the June contract settling up 59 cents at $53.13.

NYMEX April ULSD futures settled up 1.57 cents to $1.5582 gallon, edging off a $1.5627 three-week high, with the May contract up 1.45 cents at $1.5605. NYMEX April RBOB futures edged up 0.92 cent to a $1.6812 gallon settlement after trading near a three-week high of $1.6919, with the May contract up 1.03 cents with a $1.6837 gallon settlement.

Libyan crude oil production fell by about 200,000 bpd to a 500,000 bpd six-month low after a pipeline that ships crude oil from the Sharara oilfield to the Zawiya export terminal was shut and a force majeure declared on Tuesday due to militia activity.

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