By Myra P. Saefong and William Watts
Oil futures moved up on Friday, with gains for a fourth-straight session allowing prices to rebound from the lowest settlements since May after a sharp drop on Monday.
“Traders were uncertain as to whether the OPEC+ agreement was bullish, representing continued cohesion, or bearish, signaling more oil on the market,” Michael Lynch, president at Strategic Energy & Economic Research, told MarketWatch. The Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, decided on Sunday to gradually increase production levels each month starting in August.
Meanwhile, the spread of coronavirus delta variant is “seemingly bearish, but the demand data, at least for the U.S., remains bullish,” said Lynch. That “gives you a price on the seesaw.”
West Texas Intermediate crude for September delivery /zigman2/quotes/209723049/delayed CL00 -0.37% rose 16 cents, or 0.2%, to settle at $72.07 a barrel on the New York Mercantile Exchange. That led the U.S. benchmark up by 0.7% for the week, based on the front-month contract, according to Dow Jones Market Data.
September Brent crude , the global benchmark, added 31 cents, or 0.4%, at $74.10 a barrel on ICE Futures Europe, leaving it with a 0.7% climb for the week.
Oil prices had plunged in the early part of the week on “concerns that rising global delta variant infection rates could undermine the economic rebound,” or slow it down, said Michael Hewson, chief market analyst at CMC Markets UK.
These worries haven’t gone away, but even with the new OPEC+ agreement, there are still “residual concerns” that the market “could see supply struggle to keep up with demand, hence the recovery in prices heading into the weekend,” he said in a market update.
Crude plunged Monday, with WTI dropping more than 7%, in a broad selloff that was attributed in part to worries about the spread of the delta variant of the coronavirus and it’s impact on energy demand. Crude and other assets, including equities, subsequently bounced back as investors proved eager to buy the dip.
The market’s rebound “confirms our hypothesis that the selloff was ultimately sparked by external factors,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
Weinberg said it also backs up the expectation that the OPEC+ agreement to add 400,000 barrels a day each month to output as it unwinds production curbs will prevent a repeat of last year’s breakdown in the cartel.
“The supply situation remains tight, while the agreement underlines the unity of OPEC+, and the response of non-OPEC+ producers so far to the significantly higher prices leaves much to be desired,” he wrote. “This suggests that OPEC+ will maintain its ‘pricing power,’ which will lead to high prices.”
Data from the Energy Information Administration released Wednesday revealed a weekly increase in U.S. crude supplies, following eight-straight weeks of declines, but stocks at the nation’s storage hub at Cushing, Okla. fell to their lowest since January 2020.
Baker Hughes /zigman2/quotes/205323712/composite BKR +0.86% , meanwhile, reported on Friday that the number of active U.S. rigs drilling for oil climbed for a fourth week in a row, implying an production increase ahead.
On Nymex Friday, August gasoline climbed by 0.8% to $2.29 a gallon, with prices up 1.7% for the week. August heating oil tacked on nearly 0.1% to $2.13 a gallon, for a weekly rise of 1%.
August natural gas settled at $4.06 per million British thermal units, up 1.4%, to mark another finish at the highest since December 2018. For the week, prices climbed by more than 10%, the largest one-week percentage rise since the period ended Feb. 5.