By Jessica Summers
January 12, 2018, 8:13 AM GMT+8 Updated on January 13, 2018, 4:41 AM GMT+8
WTI up 4.7% this week even as U.S. oil rig count rises by 10
Brent, WTI closed with biggest weekly gains since October
Crude ended the week with a gain after breaching a key $70 threshold and rallying for five straight days.
Futures rose in New York and London, with both benchmarks closing out the biggest weekly gains since October. This week, investors saw $70 Brent crude for the first time since 2014 and a steady run of diminishing U.S. crude stockpiles amid healthy demand. Yet doubts linger that a strong price rally above that key level will persist with expanding U.S. output and a rising rig count.
“OPEC’s still doing good on their compliance and consumption is growing. They are getting the inventory drops they have been looking for,” James Williams, president of London, Arkansas-based energy researcher WTRG Economics, said by telephone. Yet, “the price is getting good and with the pop in rig count again, we are going to see a lot more completions in the Permian Basin.”
The U.S. oil rig count climbed by 10 to 752, according to Baker Hughes data released on Friday.
Oil posted a 4.7 percent gain in New York and 3.3 percent rise in London for the week as the Organization of Petroleum Exporting Countries and its allies trim output and U.S. inventories shrink. Still, Russian Energy Minister Alexander Novak told reporters Friday that producers involved in the supply-reduction deal regularly discuss options for winding down the effort. While a committee of oil ministers will discuss the matter in Oman on Jan. 21, it’s not the main goal of the meeting, he said.
As Brent hovers near $70, “it has to put pressure on OPEC to rethink their production cuts and certainly more U.S. production is economically viable,” Rob Haworth, who helps oversee $150 billion in assets at U.S. Bank Wealth Management in Seattle, said by telephone. “This is a market that could certainly use a pause.”
WTI for February delivery rose 50 cents to settle at $64.30 a barrel on the New York Mercantile Exchange, the highest level since December 2014. Total volume traded was about 15 percent above the 100-day average.
Brent for March settlement climbed 61 cents to end the session at $69.87 a barrel on the London-based ICE Futures Europe exchange after rising above the $70 a barrel threshold on Thursday for the first time in three years. The global benchmark traded at a premium of $5.64 to March WTI.
This week’s U.S. inventory report showed crude stockpiles falling for an eighth week and hitting the lowest levels since August 2015. At the same time, production dropped by the most since October, as a cold snap disrupted operations.