Monthly IEA report, Syria tensions lift oil
Crude-oil prices rose for a fifth straight session Friday, with U.S. benchmark crude tallying a gain of nearly 9% for the week, driven by fears of a U.S.-led military conflict in Syria.
A report from the International Energy Agency on Friday also indicated that OPEC soon will have succeeded in reaching its target for reducing the global supply glut.
May West Texas Intermediate crude CLK8, +0.48% tacked on 32 cents, or 0.5%, to settle at $67.39 a barrel on the New York Mercantile Exchange. For the week, the U.S. oil benchmark rallied by roughly 8.6%, which was the strongest weekly percentage performance since late July of last year.
June Brent LCOM8, +0.83% added 56 cents, or 0.8%, to $72.58 a barrel on ICE Futures Europe. For the week, in the international benchmark was up about 8.2%.
On Friday, the IEA indicated that global oil stockpiles are dwindling and approaching the five-year average the Organization of the Petroleum Exporting Countries is targeting.
“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished,’ but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its report.
The Vienna agreement refers to the group of OPEC and non-OPEC countries that in 2016 agreed to cut output in an effort to reduce a global supply glut that had dragged oil prices substantially lower. The IEA report echoes the monthly data from OPEC earlier this week, which showed the group’s output declined by 201,000 in March and that the supply surplus is evaporating.
The IEA also noted that the continuing U.S.-China trade spat could dent oil demand.
Longer term, “we are bullish on oil prices as continued global economic growth drives demand higher by approximately 1.5% per year,” said Jay Hatfield, chief executive officer and founder of InfraCap. Global supply also “remains constrained by declines in Venezuela production, flat to declining production in offshore areas such as the North Sea, offset by steady growth in U.S. production of approximately 1 million barrels per day.”
Hatfield expects WTI to trade in the $60-70 range this year and $70-80 in 2019, “with more risk to the upside.”
In the U.S., Baker Hughes BHGE, +1.37% on Friday reported that the number of active domestic oil rigs edged up by 7 this week. The figure, which offers a peek at U.S. oil activity, was up a second straight week.
Still, market participants said crude futures have come under pressure amid fears that Russia may retaliate against the U.S. by imposing sanctions in response to sanctions levied against Moscow last week in response to what the U.S. said was attempts to subvert Western democracies, and malicious cyber activities.
“This news offset good news about the ratcheted down of trade tensions with China and the possibility the U.S. could be re-entering the [Trans-Pacific Partnership],” said Phil Flynn, senior market analyst at Price Futures Group, in a note.
The fear is that sanctions from Russia could hurt demand and push prices lower, he explained.
More broadly, the stellar weekly performances for both WTI and Brent this week come as geopolitical tensions have returned to the fore after a suspected chemical-weapons attack in Syria that killed civilians over the weekend. That matter is also complicated by Syria’s friendly ties with Russia, Iran and Turkey.
May natural gas NGK18, +1.86% rose 1.8% to $2.735 per million British thermal units, for a weekly rise of 1.3%.