Oil Complex Higher on Day, Lower Week

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled modestly higher on Friday, although both West Texas Intermediate and Brent benchmarks posted better than 5% weekly declines, dragged lower by mounting concerns over demand weakness reinforced by this week's bearish economic data and flare-up in global tariff battles.

Following back-and-forth trading, NYMEX November WTI futures settled $0.36 higher at $52.81 barrel (bbl), while ICE December Brent gained $0.66 at $58.37 bbl. NYMEX November ULSD futures rallied 1.85 cents at $1.8945 gallon and the November RBOB contract was up 1.75 cents to a $1.5734 gallon settlement.

Friday's higher session reversed a string of losses for both WTI and Brent this week. Markets were gripped with bearish sentiment after weak data from the Institute for Supply Management showed steep decline in the U.S. manufacturing and service sector in September. Following the disappointing reading, U.S. equities tumbled at midweek, dragging the oil complex lower, as traders turned their focus from the supply disruption in Saudi Arabia to slowing global demand. On top of bearish data, the Trump administration issued new tariffs on $7.5 billion of European exports, including aircrafts and cheese. With retaliatory tariffs a near certainty, investors seem to have lost any hope for a swift end to global trade wars in the coming months.

Despite weekly declines, oil prices managed to end Friday with modest gains, finding support from positive economic indications generated by the U.S. jobs report, a declining rig count in the United States, and reports of unrest in Iraq's oil producing provinces.

After a series of weak economic data this week, U.S. jobs report showed steady gains in employment in the last three months, although September's estimates came slightly below market expectations at 136,000 new jobs. The national unemployment rate fell to 3.5% -- the lowest jobless rate since December 1969. Markets seemed upbeat following the government data, with Dow Jones Industrial notching gains of more than 300 points, which also pushed the oil complex higher.

Oil prices were also lent support by the early afternoon drilling report from Baker Hughes, showing the active U.S. oil-rig count dropped to the lowest level in 2-1/2 years this week. Domestic drilling activity declined now for a seventh consecutive week, with 175 rigs deactivated year to date. Analysts point out U.S. crude production growth is slowing.

Internationally, growing unrest in Iraq's southern provinces that account for one-third of the country's crude production also boosted the international Brent marker. Antigovernment demonstrations erupted in Bagdad and quickly spread across the country by the end of the week, spurred by anger over economic mismanagement and corruption. More than a dozen protesters were killed Friday and the government issued a curfew and internet blackout to calm the protests. No disruption to oil operations was reported as of Friday. The situation remains fluid.

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

(BAS)