Oil futures settled higher on Friday, shaking off earlier declines as tight U.S. crude supplies helped lift prices up for a fourth month in a row.
Prices also ended higher for the week on the back of the “favorable supply and demand dynamics,” said Lukman Otunuga, manager, market analysis at FXTM. “As concerns over the delta variant’s impact on global fuel demand ease, this could support oil bulls moving forward.”
Last week’s decline in U.S. crude inventories, meanwhile, is also supportive for oil prices as it encourages the demand outlook, he said.
U.S. benchmark West Texas Intermediate crude for September delivery
rose 33 cents, or nearly 0.5%, to settle at $73.95 a barrel on the New York Mercantile Exchange, the highest front-month finish since July 13, according to Dow Jones Market Data. Front-month prices logged a 2.6% weekly rise and a nearly 0.7% monthly climb.
July was “certainly a rollercoaster” in the oil markets, said Tyler Richey, co-editor at Sevens Report Research. The failure by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to reach a policy agreement earlier this month lifted prices to new 2021 highs before an eventual deal to raise output caused a sharp pullback, he said.
Longer-term fundamentals for oil have “deteriorated” in large part due to the OPEC+ deal to raise output, but near-term fundamentals “remain bullish as we are in a supply deficit that is expected to last through the end of the year,” Richey told MarketWatch.
Global benchmark Brent crude saw its front-month September contract
which expired at the end of the session, move up by 28 cents, or 0.4%, to end at $76.33 a barrel, around 3% higher for the week and up 1.6% for the month.
The most-actively traded October Brent crude contract
rose 31 cents, or 0.4, Friday to settle at $75.41 a barrel.
Crude got a boost earlier this week as U.S. government data showed a weekly drawdown in domestic crude, gasoline and distillate inventories.
On Friday, petroleum product futures ended higher, with August gasoline
up 0.6% at nearly $2.37 a gallon, the highest since October 2014, with prices settling 5.4% higher for the month. August heating oil
added 0.5% at $2.20 a gallon, for a monthly rise of 3.3%. The August contracts expired at the end of the session.
Domestic crude inventories are tight at 435.6 million barrels for the week ended July 23 — about 7% below the five-year average for this time of year, according to data from the Energy Information Administration.
Expectations that the oil market would see “permanent demand destruction from the COVID-19 shut down was really overplayed,” said Phil Flynn, senior market analyst at The Price Futures Group. “What we saw is the that the lack of investment in low energy prices spurred demand as the economy reopened.”
“We’re going to see an undersupplied market,” Flynn told MarketWatch. That is why we’re seeing these prices climb to these levels, he said.
Also on Nymex, September natural gas NGU21 settled at $3.91 per million British thermal units, down 3.6%, paring its monthly rise to 7.2%.
Prices pulled back to end the week as a “cooling pattern develops for the Eastern U.S. which should limit air conditioning associated electricity demand,” Troy Vincent, market analyst at DTN, told MarketWatch. Still, with record-high prices across Europe and strong Asian demand, “the pull on U.S. natural gas to the global [liquefied natural gas] market should continue to limit domestic inventories and remains extremely supportive of U.S. pricing.”