Sunday, March 6, 2016

Crude oil futures - weekly outlook: 7-11 March

Oil prices climbed to the highest level since early January on Friday, as traders shifted their focus from a global supply glut to signs of slowing U.S. shale production amid continued hopes that major producers will work together to freeze output.

On the New York Mercantile Exchange, crude oil for delivery in April surged to an intraday peak of $36.34 a barrel, the most since January 6, before closing at $35.92, up $1.35, or 3.91%.

Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. decreased by eight last week to 392, the 11th straight weekly decline and the lowest level since 2009.

There are now nearly 69% fewer rigs of all kinds from a peak of 1,609 in October 2014. A lower U.S. rig count is usually a bullish sign for oil as it signals potentially lower production in the future.

For the week, New York-traded oil futures jumped $3.20, or 9.58%, the third straight weekly rise. Since falling to 13-year lows at $26.05 on February 11, U.S. crude futures have rebounded by approximately $10, or 29%.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for May delivery soared $1.65, or 4.45%, on Friday to close the week at $38.72 a barrel after rising to an intraday peak of $38.95, a level not seen since January 4.

On the week, London-traded Brent futures rallied $3.62, or 10.31%, the second consecutive weekly gain, as continued hopes major oil producers will discuss a potential output freeze lifted prices.

Brent futures are up by roughly $9, or 25%, since briefly dropping below $30 a barrel on February 11. Short-covering began in mid-February after Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January levels, provided other oil exporters joined in.

A meeting is planned later this month in which producers will discuss the details of the proposed action.

Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by OPEC last year not to cut production in order to defend market share, driving down prices by more than 70% over the past 20 month.

Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at $2.80, compared to a gap of $2.50 by close of trade on Thursday.

In the week ahead, oil traders will be focusing on U.S. stockpile data on Tuesday and Wednesday for further evidence of a slowdown in U.S. production amid mounting concerns over a domestic supply glut.

Developments surrounding a potential deal between OPEC and non-OPEC producers to cap output will also be in focus.

Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.

Tuesday, March 8

China is to report on the trade balance.

The American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.

Wednesday, March 9

The U.S. Energy Information Administration is to release its weekly report on crude stockpiles.

Thursday, March 10

China is to release data on consumer and producer price inflation.

The European Central Bank is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

The U.S. is to produce weekly data on initial jobless claims.

Friday, March 11

The International Energy Agency will release its monthly report on global oil supply and demand.

The U.S. is to round up the week with a report on import prices, while Baker Hughes will release weekly data on the U.S. oil rig count.



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