WTI Posts 4.7% Weekly Gain

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent on the Intercontinental Exchange settled little changed on Friday. The U.S. benchmark notched a nearly 5% weekly gain, boosted by concern over supply disruption in the Gulf of Mexico and falling U.S. inventories, while heightened rhetoric over Iran's aggression in the Strait of Hormuz added to the bullishness.

The oil futures rally lost steam on Friday, as market participants continue to focus on Tropical Storm Barry as it slowly approaches the Louisiana coastline amid reports of further declines in Gulf of Mexico crude production. A total of 257 production platforms were evacuated and nearly 59% of offshore oil production has been shut-in as of Friday, the Bureau of Safety and Environmental Enforcement said this afternoon. A tropical storm in the Gulf of Mexico, which is forecast to intensify into a hurricane on Saturday, helped boost the price of oil and products this week, a development that analysts say could lift fuel costs for consumers depending on the severity of the storm.

Oil futures were further bolstered midweek in response to a sizable 9.5 million bbl draw in U.S. commercial crude inventories as of July 5, pressing stockpiles to the lowest level since mid-May. U.S. Energy Information Administration reported domestic stocks declined for the fourth consecutive week through July 5, down 26.5 million barrels (bbl) or 5.5% since the mid-June, easing some of concern over an oversupplied market. Despite falling stockpiles, U.S. production moved 100,000 barrels per day (bpd) higher last week to 12.3 million bpd after declining to a six-week low in late June.

Tensions in the Middle East show no signs of easing after an unsuccessful attempt by Iranian Islamic Revolutionary Guard Corps to seize a British oil tanker amplified geopolitical risk this week. Tehran called on Britain to immediately release an Iranian oil tanker that British Royal Marines seized last week or face retaliatory actions, elevating the risk of military confrontation in the Strait of Hormuz, a major artery for global oil flow.

In financial markets, U.S. Federal Reserve Chairman Jerome Powell struck a dovish tone before a congressional panel this week, pointing to a strong case for a 25-basis-point rate cut at the Fed's next meeting on July 30-31. Powell said many Fed officials believe monetary easing is warranted to insulate the U.S. economy from the headwinds of weakening global economic growth and rising trade tensions. Wall Street rallied on the comments, sending Dow Jones Industrial Average above 27,000 points for the first time ever, while U.S. dollar weakened to 96.424 points in index trading.

Following the Fed's remarks, European Central Bank said Thursday it is also considering cutting interest rates as well as injecting a fresh 2.92 trillion euro stimulus into Eurozone economies. Both central banks seemed to have shifted their focus in recent weeks toward interest-rate cuts to prompt slowing economic growth.

NYMEX August West Texas Intermediate settled $0.01 higher at $60.21 bbl, while ICE September Brent posted $0.20 gain at $66.72 settlement, while advancing 3.9% on a week. NYMEX August RBOB futures settled 1.25cts lower at $1.9770 gallon, but still gained 2.5% on the week and NYMEX August ULSD futures were up 0.15cts with a $1.9801 gallon settlement, 3.9% higher from Friday last week.

Liubov Georges can be reached at liubov.georges@dtn.com

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