Oil Futures End Week Up on Stock Draw

WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and Intercontinental Exchange settled up Friday, except for November ULSD futures. All contracts posted strong weekly gains, underpinned by falling U.S. inventories and a steep drop in the domestic rig count.

Following back-and-forth choppy trade, NYMEX December West Texas Intermediate futures settled up $0.43 at $56.66, while posting a better-than-5% gain on the week -- the biggest gain in nearly a month. ICE December Brent contract moved up $0.35 to a $62.02 per barrel (bbl) settlement, adding 4.4% in value from last week.

NYMEX November ULSD futures dropped 0.67 cent to $1.9796 gallon on Friday, but advanced 1.7% in value on the week, and the November RBOB contract ended the session 0.98 cent higher at $1.6730 gallon, a better-than-one-month high settlement on the spot continuous chart.

The driving factor behind this week's higher oil prices was the surprise drawdown in U.S. crude supply and larger-than-expected draws from petroleum inventories, pressing stockpiles to multi-month lows. Aside from a massive 9 million bbl decline in inventories, refinery utilization unexpectedly jumped 2% last week, suggesting refiners might be exiting fall maintenance early this year in preparation for the specification change in marine fuel directed by the International Maritime Organization. Data also shows U.S. exports nearly hit the highest rate on record last week at 3.685 million barrels per day (bpd), coupled with a drastic drop in imports, suggesting the market should remain fairly supported in the weeks ahead.

The bullish midweek report tempered inventor fears of slowing fuel demand after showing gasoline demand rose 236,000 bpd last week, 2.3% above the year-ago period during the most recent four weeks. Distillate demand over the four weeks ended Oct. 18 averaged 4.109 million bpd, up 0.8% against a year ago, while supply of distillate fuels are down 12% against the five-year average.

Oil futures were also lent support by the declining rig count in the United States, down by 17 to 696 since the prior Friday -- the largest weekly decline in six months. The number of active oil rigs have now fallen in eight of the last ten weeks, reaching the lowest level since April 2017.

Oil futures managed to post strong gains this week despite dismal economic data from Europe and Asia.

Germany's export-oriented economy continues to suffer from ongoing uncertainty amid U.S.-China trade tensions. This week, Germany reported its composite Purchasing Managers Index slumped to 48.6 in October, a near decade low, with readings below 50 indicating contraction.

Despite protracted weakness, European Central Bank left interest rates unchanged this week at negative 0.5% after cutting the rate at their previous meeting when the central bank also revived its bond-buying program indefinitely.

Next week, markets will turn their focus to Federal Reserve Open Market meeting on Oct. 29-30, where the central bank is widely expected to cut interest rates by a quarter point.

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

(BAS)