Oil Futures End Mixed on Economic Data

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures settled mixed on Friday. Crude contracts closed modestly higher and oil products lower, finding support from a better-than-expected expansion in the U.S. economy and the fourth consecutive weekly decline in U.S. drilling activity, while a strengthening dollar capped the gains.

NYMEX September West Texas Intermediate futures settled $0.18 higher at $56.20 per barrel (bbl), and the ICE September Brent contract gained $0.07 to $63.46 bbl, with both benchmarks also posting modest weekly gains. NYMEX August ULSD futures ended 0.99 cent higher at $1.9044 gallon, with the August RBOB contract shed 0.59 cent to settle $1.8744 gallon, while gaining roughly 1.8% on a week.

Oil futures settled little changed after choppy sideways trade on Friday amid a set of competing drivers, including a better-than-expected growth by the U.S. economy in the second quarter. The Bureau of Economic Analysis said on Friday the U.S. economy grew at a 2.1% annualized rate, exceeding calls for a 1.9% expansion, albeit slower than the 3.1% annual growth rate recorded for the first three months of 2019. However, the latest GDP reading boosted the U.S. dollar, which settled at a 97.751 better-than-two-month high in index trading, capping gains by the U.S. benchmark.

Friday's uneven session also comes as Trump administration approved a waiver for Chevron Corp. to continue operations in Venezuela that circumvent existing U.S. sanctions. According to wire services, the granted license is designed to allow Chevron and several other service companies to proceed with drilling activity in Venezuela's Orinoco Belt until October. Many analysts already call the move as a major departure from the policy of maximum pressure on Nicolas Maduro's regime. In January, White House announced sanctions on Venezuela's state-owned PDVSA, effectively prohibiting transactions between U.S. firms and PDVSA involving the U.S. financial system.

Domestically, oil drilling activity continues to slow as Baker Hughes reported a fourth straight week of declines in the oil rig-count. Industry data showed rigs in the United States fell three to 776 during the week ended today, the lowest count since the first week of February 2018. So far this month, the rig count has dropped by 17, and versus a year ago the count is down 85.

Market analysts believe relatively low prices are forcing U.S. drillers to focus on already drilled oil wells rather than developing new ones. Still, the lower rig count correlates with a sharp drop in domestic crude production last week, which collapsed 700,000 bpd to 11.3 million bpd—the lowest output rate since October 2018.

EIA data also showed a sizable 10.9-million-bbl draw from U.S. commercial crude inventories for last week, the six consecutive weekly decline through July 19, reducing supply 37.4 million bbl, or 8%, since June 15. Analysts largely attribute last week's sharp decline in U.S. crude stocks and output to Hurricane Barry, which disrupted oil flow in the Gulf of Mexico, shutting in nearly 70% of output at its peak.

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

(BAS)