Oil prices rebounded Friday from big losses a day earlier as investors eyed strong global demand, shrinking crude exports from Iran and low U.S. oil inventories.
Light, sweet crude for October delivery ended 0.6% higher at $68.99 a barrel on the New York Mercantile Exchange. The U.S. benchmark oil price ended the week nearly 2% higher than where it began. Brent crude, the global benchmark, slipped 0.1% to $78.09 a barrel.
“The latest IEA oil market report was released yesterday and painted a rather bullish picture as indicated by the title of its market overview: ‘tightening up on the way,’” said JBC Energy, referring to the International Energy Agency. “Global oil demand was increased by around 100,000 barrels a day in all three years, i.e. 2017, 2018, and 2019.”
That continued strength in demand points to a possible and eventual global supply squeeze, in part because U.S. oil sanctions against Iran will continue to have a bigger effect over the coming weeks and months, said Gene McGillian, vice president of research at Tradition Energy.
Oil’s surge on Friday, Mr. McGillian said, is a result of “the combination of demand improving next year and the reduced exports from Iran, plus, this week’s inventory report on U.S. crude stocks that were at a 3½ year low.”
The federal Energy Information Administration on Wednesday reported U.S. commercial crude oil inventories fell by 5.3 million barrels last week to 396 million barrels, the lowest since 2015.
FILE PHOTO A worker inspects a pump jack at an oil field in Tacheng, Xinjiang Uighur Autonomous Region, China June 27, 2018. REUTERS/Stringer/File Photo ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. CHINA OUT. Photo: china stringer network/Reuters
Oil prices pared some of their gains Friday afternoon after a report from oilfieldservices company Baker Hughes that showed the total number of active oil rigs in the U.S. jumped by seven in the latest week, to 867. Despite the weekly bump higher, the total remains hemmed inside a rather tight, four-month-old range between 858 and 869.
In the Permian basin of West Texas and parts of New Mexico, which has been facing a pipeline shortage that is forcing some oil producers to the sidelines until more infrastructure is built, the number of active oil rigs fell by one to 483 rigs, Baker Hughes said.
Despite Friday’s rise in oil prices, Alfonso Esparza, senior analyst at foreign-exchange trading group Oanda, said oil markets face some bearish headwinds in the coming days and weeks, especially as the dollar begins to rebound from a nearly six-week low. Oil is priced in dollars, and as such oil prices often move in the opposite direction of the U.S. currency.
“Geopolitical factors like the U.S.-China trade tensions will continue to put downward pressure on crude prices as higher levels of protectionist measures tend to slow down global growth,” Mr. Esparza said.
President Donald Trump on Thursday seemed to torpedo any indications U.S.-China trade discussions have recently improved. He said in a posting on Twitter that “we are under no pressure to make a deal with China, they are under pressure to make a deal with us.”
Those comments have helped the WSJ Dollar Index rise 0.3% Friday.
Also, perhaps offsetting Iran’s shrinking exports is a late-June decision by the Organization of the Petroleum Exporting Countries and its production allies, including Russia, to begin ramping up crude production after more than a year of holding back output helped put a cap on prices this summer.
“The scenario for oil remains mixed, with investors trying to price in different elements,” said Carlo Alberto de Casa, chief analyst at ActivTrades.
Among refined products, gasoline futures for October delivery fell 1.1% to $1.9702 a gallon. Diesel futures fell 0.6% at $2.2092 a gallon.