Futures Movers: Oil prices log back-to-back weekly rise, with weekend gathering of oil producers on tap

Futures Movers: Oil prices log back-to-back weekly rise, with weekend gathering of oil producers on tap

U.S. oil prices settled firmly higher Friday, after briefly paring gains, as prices bounced around ahead of meeting of major oil producers in Algiers over the weekend.

A report suggesting that major producers may increase production more in order to cover an expected shortfall in output from Iran briefly knocked prices lower.

November West Texas crude

CLX8, +0.71% on its first full day as a front-month contract, added 46 cents, or 0.7%, to end at $70.78 a barrel on the New York Mercantile Exchange, but closing off its highs at $71.80. The contract marked a weekly gain of more 2.6%, based on Friday’s close for the most-active contract.

Global benchmark November Brent LCOX8, +0.10%  added 10 cents, or 0.1%, to settle at $78.80, after also briefly turning negative, on ICE Futures Europe. The contract gained 0.9% for the week.

Both Brent and WTI posted back-to-back weekly gains.

Read: U.S. oil sanctions on Iran threaten global supplies, but a demand slowdown poses a real risk

A committee made up of representatives of the Organization of the Petroleum Exporting Countries and some of its outside allies plans to hold a meeting on Sept. 23 in Algiers. The producers had agreed in June to boost production by 1 million barrels a day in an effort to get output nearer to a previously agreed ceiling.

However, Reuters reported on Friday, citing a source familiar with the talks, that OPEC and non-OPEC countries are discussing a possible, additional output increase of 500,000 barrels a day to offset falling supplies from Iran because of U.S. sanctions.

The talk of the additional output increase “is a compromise or at least an attempt to placate President Trump,” but it still won’t be enough to offset supply losses, said Phil Flynn, senior market analyst at Price Futures Group.

The agreement back in June to lift output was seen, in part, as a response to U.S. pressure.

Oil prices have been on the rise, boosted in part by President Donald Trump’s decision to pull out of the Iran nuclear accord and renew sanctions on Tehran aimed at sharply curtailing the major producer’s exports.

Iranian exports fell by around 500,000 barrels a day between April and August, according to the International Energy Agency.

On Thursday, futures ran into an early spate of volatility after Trump in a tweet called for OPEC to maintain lower crude-oil prices.

His tweet followed reports this week that Saudi Arabia would be comfortable with prices above $80 a barrel in the near term.

Saudi Arabia, the de facto leader of OPEC, and Russia, a major producer in its own right, ramped up production this summer to compensate for some of the lost Iranian barrels.

However, additional production capacity may be limited, analysts warned.

“This was supposed to be a simple monitoring committee, in charge of making sure member states were sticking to the 2016 agreement that cut production. Instead, it is likely to turn into a meeting that, in effect, parcels out Iran’s sliding production,” wrote Robert Yawger, director of energy at Mizuho USA, in a Friday research note, referring to the Algiers gathering.

Meanwhile, Baker Hughes BHGE, +1.36%   on Friday reported that the number of active U.S. rigs drilling for oil fell by 1 to 866, for the week. Last week, the report showed a gain of 7. The total active U.S. rig count, which includes oil and natural-gas rigs, declined by 2 to 1,053, according to Baker Hughes.

U.S. crude supplies, meanwhile, have declined for five weeks in a row, according to data from the Energy Information Administration. Domestic gasoline stockpiles declined last week, though distillates, which include heating oil, edged higher.

On Nymex Friday, October gasoline RBV8, +0.01%  rose 0.1% to $2.0171 a gallon, marking a weekly increase of 2.4%, and October heating oil HOV8, -0.17%  lost 0.1% to $2.226 a gallon, but still notched a weekly rise of 0.8%.

October natural gas NGV18, +0.07%  saw muted trade, finishing less than 0.1% higher at $2.977 per million British thermal units. For the week, it rallied by about 7.6%, marking its sharpest weekly advance since Jan. 26, according to Dow Jones Market Data.

U.S. storage levels of natural gas remain 18% below the five-year average “with the official start of winter just a little over a month away,” said Robbie Fraser, commodity analyst at Schneider Electric. “Next week’s storage report is expected to widen the deficit further as hot temperatures spurred power generation demand in the eastern half of the country this week.”

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