Monday, April 11, 2016

Crude oil futures weekly outlook: 11-15 April

Oil futures soared more than 6% on Friday to settle at more than two-week highs helped in part by growing hopes major oil producers will work together to cap output at a high-stakes summit later this month and amid indications U.S. shale oil producers are cutting back on drilling activity.

On the ICE Futures Exchange in London, Brent oil for June delivery rallied to an intraday peak of $42.01 a barrel, the most since March 22, before closing at $41.94, up $2.51, or 6.37%.

On the week, London-traded Brent futures rallied $3.27, or 7.79%, the biggest weekly gain in five, boosted by expectations global producers could come to agreement to freeze production when they meet in Doha, Qatar on April 17.

Brent futures prices are up by roughly 40% 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.

Despite recent gains, investors are still divided about whether a deal will be reached after all. Iran has maintained that it will not contribute to any output freeze until its crude exports return to pre-sanction levels of around 4 million barrels a day, while Saudi Arabia has signaled it will not cap output unless Iran and other major producers do so as well.

Elsewhere, on the New York Mercantile Exchange, crude oil for delivery in May jumped $2.46, or 6.6%, to end at $39.72 a barrel, its best day since February 2012. Prices hit $39.84 earlier, a level not seen since March 28.

The U.S. benchmark held on to strong gains after oilfield services provider Baker Hughes said the number of rigs drilling for oil in the U.S. fell by eight last week to 354, the third straight weekly decline. Compared with the same time last year, the number of rigs has fallen by 406.

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 surged $2.93, or 7.37%, as an unexpected drawdown in U.S. crude stocks fed hopes that an ongoing supply glut may be nearing a tipping point.

U.S. crude stockpiles fell by nearly 5 million barrels last week, according to the U.S. Energy Information Administration, versus analyst forecasts for a build of 3.2 million barrels.

The shutdown of the Keystone crude pipeline to Cushing, Oklahoma further supported U.S. crude futures. The closure of the Keystone pipeline cut 590,000 barrels per day from the market. The pipeline was scheduled to resume operating on Tuesday.

Nymex oil prices are up nearly 40% since falling to 13-year lows at $26.05 on February 11, as a decline in U.S. shale production boosted sentiment. However, analysts warned that market conditions remained weak due to an ongoing glut.

Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at $2.22, compared to a gap of $2.17 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 fresh supply-and-demand signals.

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

Oil traders will also keep an eye out for monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency to gauge global supply and demand levels.

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

Monday, April 11

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

Tuesday, April 12

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

Wednesday, April 13

China is to report on the trade balance.

The Organization of Petroleum Exporting Counties will publish its monthly assessment of oil markets.

The U.S. is to release reports on retail sales and producer price inflation, while the U.S. Energy Information Administration is to release its weekly report on oil and gasoline stockpiles.

Thursday, April 14

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

The U.S. is to release the weekly report on initial jobless claims as well as data on consumer price inflation.

Friday, April 15

China is to publish what will be closely watched data on first quarter economic growth and industrial production.

The U.S. is to round up the week with data on consumer sentiment and industrial production, while Baker Hughes will release weekly data on the U.S. oil rig count.


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