Oil ended slightly higher on Friday, with prices extending a streak of weekly gains, as major oil producers at an OPEC-led committee meeting boasted record compliance with their production-cut agreement, but, as expected, reached no decision to extend the agreement.

U.S. benchmark, November West Texas Intermediate crude added 11 cents, or 0.2%, to settle at $50.66 a barrel on the New York Mercantile Exchange, with the contract settling at a roughly four-month high, according to FactSet data. For the week, the November contract gained 0.4%, while prices tracking the front-month contracts were up 1.5%. Oil also tallied third-straight weekly climb. Meanwhile, November Brent crude the global benchmark, added 43 cents, or 0.8%, to $56.86 a barrel on the ICE Futures Europe exchange. The contract gained about 2.2% for the week, its fourth-consecutive weekly climb.

On Friday, the Joint OPEC-Non-OPEC Ministerial Monitoring Committee, or JMMC, which includes Organization of the Petroleum Exporting Countries members Algeria, Kuwait and Venezuela as well as non-OPEC Russia, announced in a news release that the countries participating in a production-cut agreement reached record monthly compliance with the pact. Under the agreement, OPEC, along with several producers outside the cartel, said they would eliminate about 2% of the global oil supply through March 2018. There has also been speculation recently that producers are considering a further extension of the deal to the end of next year. The producers reached a conformity level of 116% in August, the committee said Friday. Compliance was at 94% in July. The release “suggested internal optimism for the effectiveness” of the output cuts, said Robbie Fraser, commodity analyst at Schneider Electric. The committee’s next meeting is set for Nov. 29 in Vienna, but that would come just a day ahead of OPEC’s regularly scheduled meeting.

Market sentiment has generally been positive lately as Brent prices got a boost from a fall in U.S. distillate stocks, which has driven up refining margins, causing a jump in the appetite for crude. The WTI weakness “reflects sharply lower U.S. crude [refinery] runs, crude stocks that are high and building, and growing crude output that was relatively unscathed” by Hurricane Harvey, said analysts at Société Générale, in a note Friday. “The Brent strength…reflects still-high crude runs in Europe and globally, due to robust refining margins.” “Going forward, WTI vs. Brent should narrow” with the WTI contango becoming “less extreme as U.S. refinery runs continue to recover,” the analysts said.

Meanwhile, U.S. output may weaken. On Friday, Baker Hughes reported that the number of active U.S. rigs drilling for oil, a bellwether for output in the industry, fell for a third week in a row, down 5 to 744 this week. Taking a look at the bigger picture, Jay Hatfield, president of InfraCap and portfolio manager of its MLP ETF said he continues to be bullish on oil prices, based on the recent weakness of the U.S. dollar, which has helped pull WTI into a higher price range. Hatfield expects oil to “trade gradually higher” throughout the fourth quarter and break into a higher range of $55-$65 during 2018.

Have a great day,

Loren R. Bailey, President
Fuel Manager Services Inc

Office: 479-846-2761
Cell: 479-790-5581