NYMEX Oil Rallies to Fresh Highs

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures rallied on Friday, with West Texas Intermediate crude settling at a near 38-month high. Meanwhile, ULSD and RBOB posted fresh multi-month highs amid bullish sentiment and a weak U.S. dollar.

"The strong [U.S.] economy and weak dollar is keeping the market bullish," said Tom Bentz, vice president at ABN AMRO, adding the market shrugged off bearish news towards the close of the session.

Phil Flynn, an analyst at Price Futures, agreed, saying President Donald Trump's speech Friday at the World Economic Forum in Davos, Switzerland, was full of optimism about the U.S. economy. The speech "led traders to believe we are back to where we were before," despite data by the Bureau of Economic Analysis showing U.S. economic growth slowed during the fourth quarter of 2017, he said.

The BEA this morning reported fourth quarter gross domestic product at a less-than-expected 2.6% annualized expansion rate following a 3.2% increase in the third quarter. Many economists still consider the U.S. economy to be in a robust expansion mode, which augers well for oil demand.

Besides, the dollar remained weak although it stabilized after Trump on Thursday talked up the U.S. currency. The dollar had dropped to a three-year low midweek after Treasury Secretary Steven Mnuchin said he welcomed its weakness. Since oil trades in dollar denominations, a weakening dollar typically boosts WTI futures.

Supply fundamentals have also supported the oil complex, particularly WTI futures. On Wednesday, the Energy Information Administration detailed a 1.1 million bbl stock draw to a 411.6 million bbl better than 2-1/2 year low last week. It was the 10th straight weekly crude stock draw. Crude oil stocks at Cushing, Oklahoma dropped 3.15 million bbl to a 39.244 million bbl three-year low, EIA reported.

Globally, Russian and Saudi Arabian energy ministers on Sunday (1/21) said the 1.8 million bpd in oil production cuts by the Organization of the Petroleum Exporting Countries and their allies currently scheduled to run through the end of December could be extended into 2019. "The market is rebalancing, so those OPEC comments were very bullish," said Bentz.

NYMEX March WTI crude oil futures settled up 63cts at $66.14 bbl, the highest settlement since early December 2014, after trading to an intraday high of $66.35. The contract gained $2.77 or 4.2% for the week.

March Brent on the Intercontinental Exchange settled up 10cts at $70.52 bbl after trading on Thursday to a $71.28 nearly 38-month spot high. Brent crude climbed $1.91 or 2.7% on the week.

NYMEX February ULSD futures were up 2.06cts at $2.1360 gallon, the highest settlement since Feb. 27, 2015, and traded to a $2.1431 near three-year spot high, while up 3.8% this week. February RBOB futures climbed 2.23cts to $1.9377 gallon at settlement, off a $1.9510 gallon nearly five-month spot high.

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