Oil futures tallied a weekly gain of more than 2% on Friday, with global benchmark crude futures at their highest settlement of the year, as tightening supplies outweighed worries about demand from China and the global economy.
Price action
-
West Texas Intermediate crude for October delivery
CL00,
-0.32% CL.1,
-0.32% CLV23,
-0.32%
rose 64 cents, or 0.7%, to settle at $87.51 a barrel on the New York Mercantile Exchange, with the front-month contract tallying a 2.3% weekly gain, according to Dow Jones Market Data. -
November Brent crude
BRN00,
-0.23% BRNX23,
-0.23% ,
the global benchmark, climbed 73 cents, or 0.8%, at $90.65 a barrel on ICE Futures Europe, for a 2.4% advance on the week. It settled at the highest since Nov. 16. -
October gasoline
RBV23,
-0.08%
tacked on 1.2% to $2.65 a gallon, for a 2.4% weekly rise, and October heating oil
HOV23,
-0.34%
climbed 2.7% to $3.30 a gallon, adding nearly 6.3% for the week. -
Natural gas for October delivery
NGV23,
+0.50%
settled at $2.61 per million British thermal units, up 1% for the session, but ending 5.8% lower for the week.
Market drivers
WTI on Thursday snapped a nine-day winning streak, while Brent ended a seven-session run of gains. Both grades ended Wednesday at their highest since 2023 and Brent settled Friday at a fresh 2023 high.
Read: Oil trades at 2023 highs. Are U.S. prices headed for $100?
The oil market’s focus has “shifted to the tight supply situation given the extensions to output curbs announced by Saudi Arabia and Russia over the course of the last week,” analysts at Sevens Report Research wrote on Friday’s newsletter. “The focus is no longer the simmering risks to demand associated with recession.”
They believe the path of least resistance is “higher for oil based on tight physical market fundamentals and the technical breakout to fresh 2023 highs.”
Gains this week came after Saudi Arabia announced it would extend a production cut of 1 million barrels a day, which took effect in July, through the end of the year, while Russia said it would also extend supply cuts.
However, crude-oil production by OPEC+, which is made up of members of the Organization of the Petroleum Exporting Countries and its allies, grew by 120,000 barrels per day in August to average 40.52 million barrels per day, according to a Platts survey by S&P Global Commodity Insights released Friday. Output increases in Iran, Iraq and Nigeria more than offset further reductions by Saudi Arabia and Russia, it showed.
Saudi Arabia’s oil production was at 8.95 million b/d in August, down 100,000 b/d month-on-month and at its lowest since May 2021, according to the survey.
Russia, meanwhile, lowered production by 20,000 b/d to 9.4 million b/d in August, it said, noting that Russia, in July, had pledged a 500,000 b/d supply cut, but specified that it pertains to exports, not production.
Monthly reports from the International Energy Agency, the Organization of the Petroleum Exporting Countries and the U.S. Energy Information Administration will be closely watched next week, said Barbara Lambrecht, commodity analyst at Commerzbank, in a Friday note.
“Until now, the International Energy Agency has presumably been assuming that the voluntary cuts would be gradually withdrawn from October and that global supply would fall 1.3 million barrels per day short of demand in the fourth quarter. At just shy of 2 million barrels per day, the deficit is now likely to be almost as high as in the current quarter,” she wrote. “This should lend good support to prices, as industrial stocks will consequently fall further behind the five-year average in the coming months.”
On Tuesday, OPEC and the Energy Information Administration will release separate monthly reports on oil, and the IEA’s monthly oil report comes out Wednesday.
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