Oil Ends the Week Higher

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher for the fourth straight session Friday, with West Texas Intermediate crude posting the biggest weekly gain this year as strong demand offset the latest data from Baker Hughes, Inc. showing the 11th consecutive weekly increase in the U.S. oil rig count.

"There's expectation that we'll see strong product demand as we get closer to the summer peak driving season, and we'll be exporting a lot of products," said analyst Phil Flynn at Price Futures.

Implied gasoline demand rose to over 9.5 million bpd with distillate demand growing to over 4.2 million bpd during the week-ended March 24, according to Wednesday's data from the Energy Information Administration. Total petroleum inventories excluding the Strategic Petroleum Reserve were drawn down 3.9 million bbl during the week reviewed that narrowed a year-over-year petroleum surplus 5.5 million bbl to 11.5 million bbl.

Houston-based oil services company Baker Hughes this afternoon reported the number of rigs actively drilling for oil in the United States increased 10 this week to a 662 19-month high, while up 330 on the year.

Today's rig count report follows EIA data released midweek showing U.S. crude oil production increased 18,000 bpd to a 9.147 million bpd 14-month high during the week-ended March 24, while commercial crude stocks rose to a 534.0 million bbl fresh record high.

Oil futures were also supported by this week's supply disruption in Libya, with about 200,000 bpd of Libyan oil production offline for the third day after a pipeline that ships crude from Sharara oilfield to Zawiya export terminal was shut on Tuesday.

In addition, wire services reported estimates of oil production by the Organization of the Petroleum Exporting Countries and Russia, saying that OPEC output declined by 135,000 bpd to 32.05 million bpd in March. Russian production was estimated to have declined by 220,000 bpd to 11.046 million bpd in March, which is about 73% of the 300,000 bpd in production cuts Moscow pledged in December under a supply agreement with OPEC.

Under that agreement, OPEC promised to reduce its output by 1.2 million bpd while 11 non-OPEC nations, including Russia, pledged to cut 558,000 bpd. So far, OPEC compliance with those planned cuts have been strong at more than 90%. However, those cuts have not reduced global inventories by much because of rising U.S. supply.

Today, Kuwait reiterated talks are underway to extend the 1.8 million bpd in planned output cuts for six more months after the expiration in June of the current quota scheme.

The May NYMEX WTI futures contract settled 25cts higher at $50.60 bbl and near a $50.80 fresh three-week high on the spot continuous chart, and gained $2.63 or 5.5% this week.

IntercontinentalExchange May Brent crude futures expired 13cts lower at $52.83 bbl, edging off a fresh three-week high of $53.45, while $2.03 or 4% higher for the week, with the June contract gaining 40cts to a $53.53 settlement.

Brent's premium to WTI futures narrowed 38cts from a day prior to $2.23 bbl one-month low.

NYMEX April ULSD futures gained 1.54cts to expire at $1.5736 gallon and near a $1.5787 three-week high. The now-expired contract gained 7.6cts or 5.1% on the week. May ULSD futures settled 1.41cts higher at $1.5746.

NYMEX April RBOB futures expired up 1.89cts at $1.7001 gallon--the highest settlement since mid-August 2015, expiring near a fresh three-week high of $1.7054. The now expired contract advanced 9.53cts or nearly 5.9% on the week. The May contract settled 1.93cts higher at $1.7030 gallon.

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