Oil saw a four week high surge on Friday night confusing investors and analysts alike.
The jump came against the trend and analysts said it was triggered by traders being forced to cover short positions as the price jump busted their limits.
For that reason it may not be a price movement that is sustainable.
Brent crude, the global oil benchmark, rose 3.7% to $US52.92 a barrel, while West Texas Intermediate, the US crude marker, was up 3.5% at $US48.74 barrel.
The data didn’t justify the surge – forecasts continue for strong US production growth – especially from the Department of Energy this week – coincided with separate data showing strong demand growth but also weaker regional output numbers.
US analysts say exports were also higher than forecast, coinciding with a seventh weekly drop in crude stockpiles in the US and the biggest fall in oil rig use so far in 2017.
The Financial Times remarked that “Despite bullish factors, some analysts are still warning the market could get caught out as it has several times this year."
Also helping push prices higher were unconfirmed reports that one of America’s biggest oil refineries (owned by Exxon in Texas) had been forced to close part of a major production unit. That will hopefully be sorted out over the weekend.
“This is a monster refinery—the second largest oil refinery in the United States,” said Phil Flynn, senior market analyst at Price Futures Group, adding that it has a capacity of 584,000 barrels a day. “The loss [according to the unconfirmed reports] of this refinery may have others scrambling to make up the difference, raising the bid on heavy oil that is getting a bit more difficult to find,” Marketwatch.com reported
Also at the back of traders minds is the coming expiration of the September futures contracts on Tuesday which will be the last day of trading for the September West Texas Intermediate futures contract.
Friday’s jump cut the loss for the week for the WTI contract to 0.6%, according to FactSet.
In London October Brent jumped $US1.69, or 3.3%, to $US52.72 a barrel and ended up 1.2% for the week.
The Energy Information Administration on Wednesday reported on Wednesday that US crude stocks fell 8.9 million barrels – the largest amount since September of last year.
But it also said production rose for the week to its highest level since mid-July 2015 – over 9.5 million barrels a day.
On Friday, Baker Hughes said the number of active US rigs drilling for oil fell 5 to 763 rigs this week the largest weekly fall so far this year and the fourth in six weeks.
