Oil weekly recap, December 23 – December 27

West Texas Intermediate rose to a 2-1/2 month high on Friday and Brent settled at the highest level in four weeks after the Energy Information Administration reported a fourth consecutive weekly decline in US crude inventories in the seven days to December 20. Strong economic data from the US over the past couple of weeks continued to improve demand prospects in the worlds top consumer. The oil market, and especially the Brent benchmark, kept drawing support by ongoing supply disruptions in Libya, holder of Africas biggest crude reserves. A weaker dollar also helped push prices up.

On the New York Mercantile Exchange, WTI crude for delivery in February rose by 0.77% to $100.32 per barrel on Friday, the highest closing price since October 18. The contract shifted in a daily range between a 2-1/2 month high of $100.75 and $99.37 per barrel. The US benchmark added 0.5% on Thursday and closed the week nearly 1% higher. Prices are up 9.3% this year.

Meanwhile on the ICE, Brent futures for settlement in the same month gained 0.17% to settle at $112.18 per barrel on Friday, the highest close since December 3. Prices varied in a days range between a four-week high of $112.79 and $111.53 a barrel. The European benchmark was unchanged on Thursday and settled the week 0.3% on the upside. Brents premium to its US counterpart narrowed for a third day to $11.86.

US crude rose above the $100 mark for the first time in more than two months on Friday as the Energy Information Administration said that US crude inventories fell for a fourth straight week and outstripped analysts’ projections. US crude oil stockpiles decreased by 4.7 million to 367.6 million, exceeding the median estimate of 10 analysts surveyed by Bloomberg for a 2.65 million drop.

Inventories at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, fell to 40.2 million barrels from 40.6 a week earlier.

US crude oil imports stood at 7.5 million bpd in the seven days through December 20, down by 197 000 from the previous period. Inbound shipments averaged 7.5 million bpd over the last four weeks, down 9.7% from a year earlier.

Refinery utilization jumped to 92.7%, up from 91.5% a week earlier. Both gasoline and distillate fuel production increased last week, averaging 9.7 and 5.1 million bpd.

Motor gasoline inventories fell by 0.6 million barrels last week to 219.9 million, defying analysts projections for a 1.1 million increase, but were near the upper limit of the average range for this time of the year. Distillate fuel inventories decreased by 1.9 million barrels to 114.1 million, surpassing forecasts for a 1 million drop, and were below the lower limit of the average range. Demand for gasoline rose by 1.8% to 9.18 million bpd, while consumption of distillate fuel jumped 2% to 4.17 million barrels per day.

Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said, cited by Bloomberg: “We are seeing lower crude and product inventories and good demand, and $100 should be a pretty firm number for a while. It supports expectations that the economy is getting stronger and demand should be higher.”

US economy outlook

Supporting those expectations, the Department of Labor said on Thursday that the number of people who applied for initial jobless benefits fell more than expected in the seven days to December 21, adding to a recent series of strong US numbers. Initial Jobless Claims declined to 338 000, outstripping analysts’ projections for a lesser drop to 345 000. The preceding period’s reading received an upward revision to 380 000, up from initially estimated at 379 000.

The Commerce Department reported on Tuesday that bookings for goods meant to last more than three years surged 3.5% in November, sharply exceeding projections for a 2.0% advance.

A separate report showed that purchases of new US homes surpassed analysts’ forecasts and remained near the highest level in five years, signaling the housing market retained momentum despite the rise in mortgage rates. New Homes Sales reached a 464 000 annualized pace, beating analysts’ projections for a drop to 435 000. October’s reading received an upward revision to 474 000, correcting the initial estimate of 444 000 homes sold.

On Monday, the final reading of the Thomson Reuters/University of Michigan consumer sentiment index confirmed the preliminary estimate and touched a five-month high of 82.5, despite trailing expectations for a rise to 83.0.

Christine Lagarde, the International Monetary Fund’s managing director, said last week the IMF is raising its outlook for the US economy as the reduction in Fed’s bond purchases and a budget deal in Washington eased concerns that the US economic growth might not be sustainable.

A weaker dollar also underpinned the market. The euro surged to a two-year high against the greenback on Friday after Jens Weidmann, a European Central Bank Governing Council member, said that keeping interest rates low may threaten political reforms.

The US dollar index fell by 0.25% on Friday to 80.47 after swinging between a two-week low of 79.83 and day’s high at 80.67. The March contract was mostly unchanged on Thursday and settled the week nearly 0.4% lower. Weakening of the dollar makes commodities priced in it cheaper for foreign currency holders and boosts their appeal as an alternative investment.

African output

Prices continued to draw support by ongoing supply outages in Libya, holder of Africas biggest crude reserves. Output remained at 250 000 barrels per day, just a fraction of the countrys 1.4 million bpd production in July, as a mix of tribesmen, militias and political minorities demanded a greater share of the countrys oil revenues and closed oilfields and export terminals.

Relieving some upward pressure, South Sudans government announced the army had defeated rebels in the capital of the countrys major oil-producing state following four days of clashes. Production had fallen to 200 000 bpd, down by a fifth, after rebel forces loyal to former Vice President Riek Machar captured some oil wells in the Unity state, a crude-producing region, which led to a loss of capacity amounting to 45 000 barrels per day. The fighting in South Sudan has led to the death of more than 500 people.

Meanwhile in France, workers voted to end the strike at Totals last striking refinery, putting an end to a two-week walkout and easing concern over refined products tightness.

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