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U.S West Texas Intermediate and international-benchmark Brent crude oil futures settled higher last week, but the limited trading range suggests the buying may be slowing. Early in the week, prices rose to their highest levels since November, driven by turmoil in Libya along with ongoing production cuts pledged by OPEC and its allies, and U.S. sanctions against Iran and Venezuela. However, renewed concerns over rising U.S. inventory and production as well as concerns over a global economic slowdown helped put a lid on prices.
For the week, June WTI crude oil settled at $64.02, up $0.87 or +1.38% and June Brent crude oil closed at $71.55, up $1.21 or +1.69%.
Mixed Bag of News
On Wednesday, the Energy Information Administration reported that U.S. crude inventories rose to their highest level since November 2017. Additionally, U.S. crude output remained at a record 12.2 million barrels per day. However, U.S. gasoline stocks fell by a whopping 7.7 million barrels last week. This was more than enough to offset the crude oil build.
At the same time, the International Energy Agency (IEA) reported that OPEC production fell 550,000 bpd. The IEA also said that U.S. sanctions and power outages pushed OPEC member Venezuela’s crude output to a long-term low of 870,000 bpd, even lower than OPEC had reported the day before.
Prices plunged on Thursday as traders continued to react to rising U.S. inventories. The price action, however, suggests the selling may have been fueled by technical factors.
On Friday, WTI and Brent crude oil were underpinned by stronger-than-expected exports data out of China. Exports in China rose 14.2 percent in dollar terms last month, nearly double what economists expected. However, the news wasn’t strong enough to drive the markets to new highs.
Rig Count Rises
Energy Services firm Baker Hughes on Friday, reported that the number of active U.S. rigs drilling for oil rose by two to 833 last week. That followed an increase of 15 oil rigs the week before.
Funds Continue to Build Long Positions
Money managers raised their net long U.S. crude futures and options positions in the week to April 9, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
Weekly Forecast
Support has been strong because supply is tightening. This is being supported by real supply data. Concerns over demand are just speculation. Earlier in the week, Bernstein Energy said in a note, “We believe global demand has another 10 million bpd of growth, with over half from China.”
Additionally, “While macro fears of an economic hard landing may be overblown, the concentration risk of global oil demand (in Asia) remains under appreciated,” RBC Capital Markets said.