DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange reversed higher in late morning trade and rallied to fresh highs Friday afternoon after the Iranian-aligned Houthis militia claimed responsibility for a drone attack on a Saudi Arabian airport and airbase earlier this week, heightening the risk of supply disruption in the world's largest crude oil exporter amid tightening global oil market.

Further bolstering the oil complex, the U.S. dollar faded earlier gains to finish below 90.50 level after University of Michigan reported its consumer sentiment index unexpectedly declined in early February, with the souring sentiment concentrated in the expectations index among households making less than $75,000 a year. At 76.2, the consumer sentiment index dropped to a four-month low and missed analyst expectations for an improvement to an 80.9 reading.

"Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than any time since 2014," said Richard Curtin, chief economist of the consumer survey.

Even more surprising was the finding that despite the expected passage of a massive $1.9 trillion stimulus bill, consumers viewed prospects for the national economy less favorably in early February than last month.

On the session, West Texas Intermediate for March delivery futures rallied $1.23 to settle at $59.47 barrel (bbl), while international crude Brent April contract advanced $1.29 to finish at $62.43 bbl. Both benchmarks finished this week at their highest points on the spot continuous charts in 13 months.

NYMEX March ULSD futures added 2.68 cents to $1.7714 gallon and March RBOB futures surged 4.23 cents to $1.6925 gallon.

Friday's gains came despite Baker Hughes data released early afternoon showing the number of oil-drilling rigs in the United States increased for the twelfth consecutive week through Friday, reaching the highest level since May 2020. At 306, the number of active oil rigs rose seven from the prior week but are down 372 from the comparable week a year ago. During the fourth quarter 2020, the number of rigs increased a total of 84 while gaining 39 so far in the current quarter.

In its latest Oil Market Outlook, International Energy Agency raised its forecast for producing nations outside Organization of the Petroleum Exporting Countries, projecting supply growth of 290,000 barrels per day (bpd) for an increase of 830,000 bpd this year. Despite increasing its production estimates, the IEA said a recovery in demand would outstrip production in the second half of the year, prompting "a rapid stock draw" of the glut of crude that has built up since the pandemic began. For the year, the agency expects global oil demand would grow by 5.4 million bpd in 2021 to reach 96.4 million bpd, noting this would be around 60% of the volume lost to the pandemic in 2020.

Separately, Yemeni Houthis' military spokesman said Friday the rebel group was responsible for drone attacks on Saudi Arabia's Abha International Airport and King Khalid Air Base this week. The attack comes less than a week after President Joe Biden's administration halted support for Saudi-led offensive operations against the Houthis. The U.S. State Department also removed the militant group from the list of U.S. government-designated Foreign Terrorist Groups, where it had been placed right at the end of former President Donald Trump's tenure in January.

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