Oil Futures Rise again on Weaker US Dollar, Large Inventory Draw

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Reversing Thursday's losses, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced in early trade Friday, with all contracts on track for modest weekly gains as a softer U.S. dollar joined with ongoing supply disruptions in the offshore Gulf of Mexico countered concerns over a slowing economy domestically and rising COVID-19 infections that are set to undermine gains for gasoline demand.

Near 7:45 a.m. ET, NYMEX October West Texas Intermediate contract gained $1.28 to $69.14 per barrel (bbl), and Brent crude for November delivery advanced to $72.78 bbl, up $1.33 early in the session. NYMEX October RBOB futures rallied 4.16 cents or 2% to $2.1413 gallon, and front-month ULSD futures advanced 3.17 cents to $2.1454 gallon.

Early morning gains in the oil complex were underpinned by a weakening U.S. Dollar Index that had fallen to a one-week low 92.330 overnight following Thursday's tapering decision by the European Central Bank. ECB President Christine Lagarde was cautious to not brand the move as "tapering," but noted the central bank would slow bond purchases under its 1.85 trillion-euro Pandemic Emergency Purchase Program at a moderately lower pace than the 80 billion euros a month it bought over the previous two quarters. This marked the first step toward unwinding the emergency aid that has propped up the euro economy during the coronavirus pandemic. Analysts estimate that PEPP will likely be reduced to between 60 to 70 billion euros per month.

"We are not out of the woods, we are not on the green, as the golf players will appreciate," Lagarde said.

With rising infection rates in the United States and what can be described as a half-baked recovery in the labor market, U.S. Federal Reserve is unlikely to move on tapering its $120 billion a month bond purchasing program at the next meeting on Sept. 21-22.

U.S. equity futures moved mixed early Friday following four consecutive sessions of losses, sending Dow Jones Industrials as much as 150 points lower at Thursday's close. Investors are reassessing the shape of the recovery in the U.S. labor market after better-than-expected jobless claims showed the number of first-time claims for unemployment benefits dropped to the lowest since March 19, 2020. At 310,000, the number of initial fillings is just 50,000 above the pre-pandemic average for March 2020. Claims have dropped from a record 6.149 million in early April 2020.

Further supporting the oil complex, government data from the Bureau of Safety and Environmental Enforcement said Thursday about two-thirds of 1.8 million barrels per day (bpd) in crude output shut-in the Gulf of Mexico by Hurricane Ida remains offline. Operators in the region brought back about 500,000 bpd of shut-in output as of early Thursday afternoon. There were about 15% of offshore platforms in the GOM that reported "evacuated status," an improvement signaling the industry is positioning for the restart. The Louisiana Offshore Oil Port said on Thursday that it has resumed delivering crude oil to the regional refineries.

"As the supply chain is functioning, there will be no further updates," the announcement read.

Currently, four refineries in Louisiana with capacity of about 1 million bpd remain offline, according to the data from the U.S. Department of Energy, with three of these facilities are in the process of restarting.

Entergy, which serves as the power provider for Louisiana and Mississippi, said on Wednesday that it received permission from the U.S. Nuclear Regulatory Commission to restart operations at its 1.2 GW Waterford 3 nuclear plant that remained closed since Aug. 29, which should further boost electricity supplies across the region.

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

Liubov Georges