Crude Posts Biggest Weekly Gain in More Than Two Months

(Bloomberg) -- Oil posted the biggest weekly rise in more than two months as shrinking stockpiles and supply disruptions from Canada to Libya compounded the growing isolation of OPEC's third-largest oil producer.

Futures advanced 8.1 percent this week in New York, above London-traded Brent crude's gain of 5.1 percent. The world's two most important oil benchmarks are diverging as Saudi Arabia's pledge to lift output weighs on the European marker. Meanwhile, U.S. inventories are shrinking and Iranian crude production is expected to plunge 66 percent by the end of the year, according to Facts Global Energy, a research and consulting firm.

“The U.S. market is significantly tighter compared to the seaborne market,” said Georgi Slavov, head of research at London-based commodities broker Marex Spectron. Russia, the Saudis and other nations are boosting production but “on the other side of the Atlantic, you don't have this.”

Crude in the U.S. has rallied more than $5 since last week's decision by the Organization of Petroleum Exporting Countries and allied producers to relax supply limits. The rally has also been fueled by a major disruption to Canadian output and internal conflict in Libya. As for Iran, if the recent re-imposition of U.S. sanctions succeeds in driving the Islamic Republic's oil exports close to zero, crude may surge to $100 a barrel, according to JBC Energy GmbH.

“It's pretty clear that concern about supply going forward is helping to boost prices,” said Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut.

West Texas Intermediate crude for August delivery rose 70 cents to settle at $74.15 a barrel on the New York Mercantile Exchange, the highest since November 2014. WTI posted a 4th quarterly gain, the longest run since 2009-2010.

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Brent for August settlement, which expires Friday, advanced $1.59 to end the session at $79.44 on the London-based ICE Futures Europe exchange. The global benchmark is at a $5.29 premium to WTI for the same month after trading at more than $10 less than two weeks ago.

In the U.S., the Energy Information Administration reported on Wednesday that nationwide crude stockpiles fell by 9.89 million barrels last week, the biggest decline since September 2016. Inventories in the storage hub at Cushing, Oklahoma, also declined, while domestic crude exports surged to a record.

Oil-market news:

• Gasoline futures rose 2.2 percent to settle at $2.1791 a gallon.
• The U.S. oil rig count fell by 4 to 858 rigs this week, according to Baker Hughes data.
• Money managers cut bullish ICE Brent crude oil bets by 5,231 net-long positions to 453,218, weekly ICE Futures Europe data on futures and options show.

--With assistance from Tsuyoshi Inajima, Heesu Lee and Grant Smith.

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada, Mike Jeffers

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