Market Close: Aug 28 Up
Aug 28th, 2015 by loren
Oil futures settled higher on Friday to score a nearly 12% a weekly advance on growing expectations that overall weakness in prices will soon prompt sizable declines in production.
Also providing support were rising tensions in Yemen, which raised concerns over stability in the Middle East. West Texas Intermediate crude for October delivery tacked on $2.66, or 6.3%, to settle at $45.22 a barrel on the New York Mercantile Exchange, for a 11.8% weekly climb. That was the largest weekly percentage gain since March 2009, according to FactSet data.
October Brent crude on London’s ICE Futures exchange added $2.49, or 5.2%, to $50.05 a barrel, about 10.1% higher on the week. On Thursday, WTI and Brent prices surged 10.3%, the largest one-day percentage gains since March 2009 for Nymex crude and since December 2008 for Brent crude. “Oil ultra bears got hit with a reality check after oil posted its biggest on day snap back since the crazed buying days at the beginning of the frenzy buying of 2008,” said Phil Flynn, senior market analyst at Price Futures Group. “The complex has yet to feel the full impact of coat tail spending cuts and project cancellations that will provide a tighter market of oil in the future, when the global economy comes back,” Flynn said. “Already this year, global oil-demand growth is the strongest we have seen in five years and if we see that surge in the last half of the year, we could see the market tightening much quicker than anticipated.”
Oil markets saw a spike late in Thursday’s trading session after The Wall Street Journal reported that oil producer Venezuela requested an emergency meeting of the Organization of the Petroleum Exporting Countries in coordination with Russia to stem the oil-price rout. “Oil-producing countries have such high cost structures that they cannot survive low oil prices long term,” said Ted Izatt, chief strategy officer of global resources firm SDKA International. “Long term, there will be increasing pressure for OPEC to reduce production.” Most analysts don’t believe that OPEC will make any changes to its production ceiling of 30 million barrels a day, though by some estimates, actual output is well above that.
Oil futures added to gains Friday after data from Baker Hughes showed that the number of active oil-drilling rigs edged up by 1, but the total number of active rigs fell.