By Myra P. Saefong and William Watts
Oil futures climbed Friday for a fifth session in a row, with U.S. prices up nearly 17% for the week after the recent decision by major oil producers to cut output.
West Texas Intermediate crude for November delivery /zigman2/quotes/211629951/delayed CL.1 +0.17% /zigman2/quotes/209723049/delayed CL00 +0.17% rose $4.19, or 4.7%, to settle at $92.64 a barrel on the New York Mercantile Exchange. Front-month prices ended 16.5% higher for the week, up a fifth straight session to mark their highest finish since Aug. 29, according to Dow Jones Market Data.
December Brent crude , the global benchmark, climbed $3.50, or 3.7%, to end at $97.92 a barrel on ICE Futures Europe, their highest close since Aug. 30 — up 15% for the week.
Back on Nymex, November gasoline rose 2% to $2.7346 a gallon, ending the week more than 15% higher. November heating oil added 4% at $4.0187 a gallon, the highest finish since late June and up nearly 25% for the week.
November natural gas fell 3.2% to $6.748 per million British thermal units, with prices down 0.3% for the week, down a seventh consecutive session.
Brent and WTI both saw strong weekly gains after the OPEC+ — made up of the Organization of the Petroleum Exporting Countries and their Russia-led allies — agreed on Wednesday to cut its output target by 2 million barrels a day starting in November.
“For several weeks, fears about a weakening global economy had been weighing on oil prices,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch. “This week, however, sentiment changed after OPEC+ showed the world that it is prepared to cut supply to defend the price in the face of political and central bank opposition from the U.S. and other countries.”
Daily output is, in reality, likely to “decline by only 1 million barrels because many countries are already producing well below quota,” said analysts at Commerzbank, in a Friday note. However, “this would still be enough to prevent the surplus that has been predicted for the final quarter of this year.”
The European Union’s embargo on Russian oil purchases and the possible implementation of a price cap on Russian oil are coming ever closer, which could prompt Russia to further cut its production, while no significant expansion of non-OPEC supply is in sight, either, the analysts wrote.
“Against this backdrop, a whole series of bad economic news would probably be needed to put any substantial pressure on prices again,” they said.
Crude fell sharply last month, with WTI and Brent testing eight-month lows as investors reacted to fears aggressive tightening by global central banks would send the economy into a sharp downturn.
Looking back at the price range before COVID and the Russia-Ukraine conflict, the “current levels seem pretty sustainable given the macro picture,” said Daniela Hathorn, market analyst at Capital.com, in emailed commentary. “In fact, we have seen the Biden administration hint at possible further releases of its Strategic Petroleum Reserve stockpiles to further stabilise prices.”
This further tightening of supply has “helped oil prices break away from the recent downtrend, but the longer-term trend is likely going to continue to be determined by demand concerns,” she said.