Oil Futures Rally Into Close

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled sharply higher Friday. This capped a string of consecutive daily advances and snapping a series of weekly declines with a big advance from prior Friday in closing out business for June, the second quarter and the first half of 2017.

Already headed for the first weekly advance in six weeks, nearest delivered oil futures surged Friday afternoon after oil services provider Baker Hughes, Inc. reported a two-rig decline in the United States oil rig count for the week ended today.

It was only the second week in 2017 in which the number of active oil rigs declined and the third weekly decrease in a year, which followed a midweek report from the Energy Information Administration showing a 100,000 barrels per day decline in U.S. crude production for the week ended June 23 to an 11-week low at 9.25 million bpd.

U.S. crude production remains high, up 480,000 bpd this year through prior Friday. However, Wednesday's U.S. Energy Information Administration report followed by today's rig data worked to ease concern over global oversupply that was showing no signs of abating through much of June, souring market sentiment and pressing oil futures into a bear market last week.

"There are signs of production pullbacks by U.S. producers as well as a capital pullback in the Permian Basin as the money for new projects seems to have dried up," said Phil Flynn, a Chicago-based senior market analyst with The PRICE Futures Group.

Friday's rally coincided with the contract expirations of NYMEX July ULSD and RBOB futures and ICE August Brent crude futures this afternoon, and ahead of the Fourth of July holiday on Tuesday. A weaker U.S. dollar, which slumped to a nine-month low in index trading, and stock market gains also lent upside support for oil futures in closing out the quarter.

Nearest delivered West Texas Intermediate and Brent crude ended at two-week high settlements, RBOB futures at a three-week high settlement, and ULSD futures at a one-month settlement high.

Friday marked the seventh-consecutive session with an advance for WTI, Brent and ULSD futures while the RBOB contract extended its gains for a fifth-straight session. The rallies, spurred by short covering and bargain hunting, follow declines in intraday trades to 10-month lows for WTI and ULSD futures and to seven-month lows for Brent and RBOB futures earlier this month.

NYMEX August WTI futures settled up $1.11 at $46.04 bbl, and rallied $3.03 or 7.0% from prior Friday after trading at a $42.05 10-month intraday low on the spot continuous chart on June 21. WTI futures however erased $7.68 or 14.2% of its value during the first six months of 2017.

ICE August Brent crude expired up 50 cents at $47.92 bbl, rolling off the board $2.38 or 5.2% higher than week prior, while the September contract rallied $1.14 to a $48.77 settlement. Earlier this month, August Brent crude sunk to a $44.35 seven-month low on the spot continuous chart, with nearest delivered Brent down $8.90 or 16.0% from the end of 2016 through today.

NYMEX July ULSD futures expired 2.95 cents higher at $1.4755 gallon, and carved out a 10.38 cents or 7.6% advance from prior Friday; the best advance on the week, which followed a dive to a 10-month spot low of $1.3540 plumbed on June 21.

August ULSD futures rallied 3.26 cents to a $1.4831 gallon settlement. During the first six months of 2017, nearest delivered ULSD futures are down a steep 22.88 cents or 14.1%.

NYMEX July RBOB futures expired 2.96 cents higher at $1.5152 gallon, with the August contract advancing 3.67 cents to a $1.5137 gallon settlement. The RBOB contract had tumbled to a $1.3955 seven-month spot low earlier in June, but advanced 8.11 cents or 5.7% on the week. In 2017, the gasoline contract closest to expiration lost 14.99 cents or 9.9% of value.

Brian L. Milne can be reached at brian.milne@dtn.com

(TN)

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