Oil prices ended at a two-week high Friday, with US crude recording its biggest weekly gain for a month as the US dollar fell for the day and the week.
Thanks to a mix of factors, including bullish Chinese oil import figures and geopolitical risks from oil-rich regions in the Middle East, particularly in the wake of President Donald Trump’s refusal to certify Iran’s compliance with the nuclear deal.
A Financial Times report that Saudi Arabia may shelve the huge Saudi Aramco IPO in favour of a private share sale also failed to have a lasting impact on oil prices..
November West Texas Intermediate crude rose 85 cents, or 1.7%, to settle at $US51.45 a barrel in New York. For the week, it was up around 4.4%.
On the week, December Brent crude futures, rose 92 cents, or 1.6%, to $US57.17 a barrel in London to be up 2.8% higher for the week.
Both US and Brent crude contract settlements were the highest since September 29 and their strongest weekly percentage gains since the week ended September 15, according to data from the US data group, FactSet.
In a speech on Friday, Trump refused to certify Iran’s compliance with a 2015 international agreement to curb Iran’s nuclear program in exchange for economic sanctions relief.
The lifting of sanctions at the start of 2016 has allowed Iran to significantly increase its production to around 3.8 million barrels a day, thereby adding to the global oversupply and eventually forcing OPEC to put a cap on production.
That’s why one of the major reasons the Saudis want Iran hit by Trump and new sanctions imposed on its oil exports, a move that will not be supported by Europe, China or Russia.
Trump announced plans for a new strategy in dealing with Iran that include new sanctions on the country. But this all depends on the US Congress agreeing to change the sanctions regime.
The moves could undermine Iran’s oil export capacity, but not any time soon, US analysts said.
At the same time, tensions are building between the Iraqi government and the leaders of the semiautonomous Kurdistan region in the north, which late in September held an independence referendum. Crude exports out of the region total over 500,000 barrels a day.
Meanwhile, Chinese crude imports rose by roughly 1 million barrels a day in September, on the month, to 9 million barrels a day, according to government trade figures released Friday. Some analysts say that increase was due to the government adding to its strategic reserves.
On top of this the two closely watched monthly reports from the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency were seen as positive for sentiment.
OPEC said its crude oil production had risen by nearly 90,000 barrels a day in September, while raising its forecast for global demand for this year and next. And the IEA said OPEC’s efforts to cut output had helped global supply rise in September due to increased US production, and would also help cut the expected surplus next year.
On Friday, however, Baker Hughes reported that the number of active US rigs drilling for oil fell for a second week in a row—by 5 to 743 this week.
And figures released on Thursday by the US Energy Information Administration (EIA) showed a larger-than-expected decline in last week’s domestic crude-oil supplies, their third-consecutive weekly fall. The fall of 2.8 million barrels to 462 million was bigger than expected. But the total was still described as being high for this time of year by the EIA. US production dipped 81,000 barrels last week to 9.480 million barrels – that’s still a million barrels a day higher than a year ago.
