Oil Futures End Higher

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures overcame a weak start and rallied in midsession before settling at multi-month highs on Friday. Technical support and bullish sentiment across the futures complex, driven by data showing strong demand in the United States and tightening global supply, boosted the market.

"The technical explanation for today's rally is that [West Texas Intermediate crude and RBOB] didn't break key support levels in October, and as a result we are taking another leg higher," said Brian LaRose at ICAP in Jersey City, N.J. "Everyone is going long now."

Other analysts pointed to bullish oil market fundamentals, with U.S. Energy Information Administration's data showing petroleum inventories were drawn down by 12.5 million bbl while total petroleum demand increased to over 20 million bpd during the week ended Oct. 20.

The data showed U.S. crude exports soared and domestic refinery crude inputs jumped 586,000 bpd.

"The GDP is strong, equities are rallying, which speaks to fuel demand and so there is a risk-on mentality," said Tom Bentz, vice president at ABN AMRO in New York. "This rally is due to positive sentiment ... the market has been on a positive mode for some time because OPEC has been saying all the right things and recent comments by Saudi Arabia Crown Prince and Russia have supportive to crude prices."

Saudi Arabian Crown Prince Mohammed bin Salman on Thursday backed a plan to extend the ongoing oil output cuts of 1.8 million bpd by the Organization of Petroleum Exporting Countries and their 10 non-OPEC producer allies. Prince Salman's comment echoed Russian President Vladimir Putin who said he's open to extending their agreement through December 2018 instead of letting it expire next March.

Meantime, Houston-based oil services firm Baker Hughes, Inc. Friday reported the number of active oil rigs in the United States added one to 737 this week, posting the first uptick in four weeks. At 737, U.S. oil rig count is up 296 from a year ago but near a four-month low of 736 seen last week. The rigs data continues to suggest a slowdown in domestic drilling activity, said analyst Phil Flynn at Price Futures in Chicago.

Crude oil futures' rally was limited however by a strong dollar, with the greenback rallying to a 2-1/2-month high on expectation that a hawkish economist will be appointed to replace Janet Yellen as the new chair of the Federal Reserve.

NYMEX December WTI crude settled $1.26 higher at $52.90 bbl, near an eight-month high of $52.98 while posting a weekly gain of 4.7%. ICE December Brent crude surged $1.14 to $60.44 bbl, off a 28-month high of $60.53 while up 4.7% for the week. Brent traded at a $6.54 premium to WTI.

NYMEX November ULSD futures climbed 2.50cts to $1.8669 gallon, moving off a 28-month high of $1.8775 and posted a weekly gain of 3.4%. November RBOB futures advanced 1.80cts to $1.7686 gallon settlement, off a two-month high of $1.7757 while posting a weekly gain of 5.4%.

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