(Bloomberg) — Oil posted its sixth weekly advance, closing at the highest level since March 6 after a U.S. jobs report beat analysts’ forecasts, adding to a rally fueled by a tentative OPEC+ deal to extend output cuts.
Futures in New York rose 11% this week, topping $39 a barrel for the first time since early March. Ahead of a Saturday OPEC+ meeting, the producer alliance agreed to extend output curbs by another month after members who haven’t complied with the quotas said they would compensate in the coming months. U.S. stocks jumped after the employment report bolstered expectations for the economy to rebound quickly from coronavirus lockdowns.
The real test for oil will be getting past $41, where futures stood before the market’s historic crash in March, said Robert Yawger, director of the futures division at Mizuho Securities USA. “You’d be hard pressed to find a more bullish situation than closing that gap,” he said.
The market has staged a rapid recovery from its mid-April plunge below zero, but the rebound remains fragile, with prices still down 35% this year. Sustaining the rally hinges on a combination of returning demand and ongoing output cuts at a time when higher prices are prompting some U.S. producers to re-open wells.
Money managers are piling in, boosting bullish Nymex WTI crude oil bets to the highest in about 22 months.
Still, the demand recovery is uneven. U.S. diesel demand fell to the lowest level in 21 years last week and, in Europe, profits from making the fuel are collapsing, threatening to limit demand for crude. On the other hand, China, the world’s second-biggest oil user, is recovering quickly, with consumption back to pre-pandemic levels.
OPEC+’s historic agreement to trim 9.7 million barrels a day of production has supported prices. Moscow, a habitual laggard, has complied punctiliously with the historic accord brokered by U.S. President Donald Trump, and wants to make sure others do too.
Now the group is set to extend those cuts after almost a week of wrangling and high-stakes negotiation. The cartel and its allies will hold a round of meetings starting at 8 a.m. New York time on Saturday.
- West Texas Intermediate for July rose $2.14 to settle at $39.55 a barrel in New York
- Brent for August delivery added $2.31 to $42.30 a barrel
WTI for 2021 traded above $40 a barrel on Friday, the highest level since March. A $45 price could be enough to see renewed production growth in the Permian Basin, Citigroup analysts wrote in a report.
Other oil-market news:
- Cristobal, now a tropical depression, will untangle itself from the Yucatan Peninsula late Friday and move north across the Gulf of Mexico, gathering strength as it heads for the Louisiana coast.
- A supertanker carrying as much as 2 million barrels of American crude is steaming toward China, in the latest sign that demand in the world’s second largest oil consumer is on the rebound.
- A massive fuel spill in Siberia prompted Russia to declare a state of emergency in the region as the mining company involved said the catastrophe may have been caused by climate change.
- The number of rigs drilling for oil and gas fell to the lowest level since 1999 in May, as weak crude prices stymied activity.
–-With assistance from Elizabeth Low, Alex Longley and James Thornhill.
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