Oil rose to a four-week high in New York, heading for a weekly gain amid signs of strengthening US fuel demand and speculation that some producers will complete an accord to freeze output.
Futures are headed for the biggest weekly gain in seven years after data on February 24 showed US gasoline demand rose as supplies fell last week. Producers are deciding where to meet next month for discussions on the output freeze provisionally agreed between Saudi Arabia and Russia last week, Venezuelan Oil Minister Eulogio Del Pino said on the TeleSur television network. Gains accelerated after data showed that the US economy grew at a faster pace than initially estimated.
“There are a lot of nervous shorts out there and they are reacting to these comments about an Opec meeting with Russia,” said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. “It’s a repetition of what we have been hearing, but this talk continues to be rewarded by the market.”
Crude is still down about 10% this year on concern a worldwide surplus will be prolonged because of rising US stockpiles, which have swelled to the highest level in more than eight decades. Iran has pledged to increase shipments by as much as 1mn barrels a day after sanctions were lifted last month, and officials there dismissed the prospect of joining the output freeze.
West Texas Intermediate for April delivery climbed $1.20, or 3.6%, to $34.27 a barrel at 9:39am on the New York Mercantile Exchange. Futures touched $34.69, the highest level since January 28. Total volume traded was 59% above the 100-day average. Front-month futures, which are up 16% this week, heading for the biggest weekly gain since January 2009.
Brent for April settlement, which expires on Monday, rose $1.26, or 3.6%, to $36.55 a barrel on the London-based ICE Futures Europe exchange. Prices are up 11% for the week. The European benchmark crude traded at a $2.28 premium to WTI. The more-active May contract rose $1.07¢ to $36.77 a barrel.
Gasoline demand climbed as US pump prices lingered near a seven-year low. Consumption of the fuel advanced 1.8% to 9.06mn barrels a day through February 19, averaged over four weeks, according to Energy Information Administration data. Consumption was up 5.2% from the same period last year.
“We’ve attracted a lot of length into the market,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “I don’t see prices moving above $35 as long as we have more than 500mn barrels of crude in storage here, US production remains above 9mn barrels a day, no producers are cutting back and Iran is intent on reaching pre-sanctions levels.”
Exxon Mobil Corp may lose its top-notch credit rating from Moody’s Investors Service as the oil-market collapse imperils cash flow needed to cover payments to shareholders and investment in new discoveries. Seven of the other largest US energy explorers also were put on notice or downgraded by Moody’s on Thursday after the rating company concluded prices will remain weak for years.
The supply cap agreed with Saudi Arabia will need to be in place for a minimum of 12 months to support prices, Russian Energy Minister Alexander Novak said on Thursday. A meeting with the Iranian Oil Minister is possible next month, he said. Iran, seeking to boost exports after sanctions were lifted, said the deal is “ridiculous,” while Iraq said a pact hinges on unified support.