Oil Spikes to End the Week

OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange oil futures and Brent crude oil on the Intercontinental Exchange settled higher Friday as media reports indicate Iran could be prepping to restart its idled nuclear plant.

Contract purchasing ahead of the weekend and continued strong demand for U.S. crude at refineries is keeping a floor below prices, traders say, despite ongoing seasonal maintenance expected to conclude before Memorial Day.

After the 2:30 PM ET close, NYMEX June West Texas Intermediate futures settled $1.29 higher to $69.68 bbl, a nearly 41-month high settlement on the spot continuation chart. WTI, up $1.62 on the week, tested psychological resistance at $70 bbl with $69.97 intraday trade.

ICE Brent crude for July delivery was up $1.25 at settlement to $74.87 bbl, with the spot contract edging $0.23 higher on the week. Brent traded at a $75.08 intraday high.

NYMEX June RBOB futures rose $0.0265 to $2.1140 gallon, while down 1.29cts on the spot chart compared with prior Friday. The June ULSD contract was $0.0413 higher at $2.1540 gallon, eking out a $0.0031 spot gain on the week.

WTI futures rallied despite the latest U.S. oil rig count, which rose nine this week to a 38-month high of 834, according to Baker Hughes. Rigs advanced for fifth straight week, while up 131 on the year.

"Again, I think it all comes down geopolitical issues and short covering ahead of the weekend," said Stephen Schork of the Schork Report. "We're seeing at least a six to seven dollar premium on crude that's being driven by headlines," he said. "It's the age old maxim at work to buy the rumor and sell the fact. We'll have to see how that plays out as we get confirmations on these things."

Media reports from Thursday state Israeli satellite firm iSi detected "unusual activity" around Iran's Fordo nuclear research facility on April 29, including what they say appears to be an open gate to the facility's uranium enrichment tunnel "which hasn't been seen in recent months." The report comes amid weeks of speculation U.S. President Donald Trump is leaning toward not re-certifying the 2015 deal.

To be fair, a spokesman for the Atomic Energy Organization of Iran (AEOI), Behrouz Kamalvandi, said Feb. 1 that "we are at the stage of installing some equipment and Russian experts will arrive in Iran on Sunday to begin the installation work." On the same day, AP quoted Russia's RIA Novosti news agency as saying that the Russians were set to arrive at the Fordow nuclear facility later that week.

The activity, traders say, which appeared in separate photos between July 8, 2016 and last Sunday, may signal Iran has little intention in complying with the terms of the arrangement, especially given Trump's demands, and is in fact making preparations to restart the idled facility in advance of a self-imposed May 12 deadline by the President.

Should the U.S. re-impose sanctions on Iran, analyst estimate exports of crude oil from the oil producing nation could decline by 300,000 bpd to as high as 1.0 million bpd. The potential export shortfall would coincide with record high U.S. demand for crude both domestic and for exports as a result of reduced output from Venezuela, Mexico and Canada.

Brian Whary can be reached at brian.whary@dtn.com