WTI set for longest rally in a year as Cushing supplies extend drop, winter demand

West Texas Intermediate crude was little changed on Friday and headed for a sixth weekly advance as cold weather in the US boosted heating demand and a new pipeline further drained inventories at Cushing, Oklahoma. The oil market, especially the Brent benchmark, remained supported above the $110 mark by escalating protests in Venezuela and impaired supply from Libya and South Sudan. Market analysts eyed upcoming housing data from the US later in the day. A weak dollar was also supportive.

On the New York Mercantile Exchange, WTI futures for settlement in April fell by 0.11% to $102.64 per barrel by 8:02 GMT and varied in a daily range between $102.59 and $102.92 a barrel. The US benchmark lost 0.1% on Thursday but is up 2.5% on weekly basis, set for a sixth straight weekly advance, the longest winning stretch in a year. Prices are up 4.4% this year.

Meanwhile on the ICE, Brent crude for delivery in the same month was unchanged at $110.30 a barrel and held in a range between $110.20 and $110.50. The European benchmark lost 0.15% on Thursday but is up 1.1% on weekly basis. Brents premium to its US counterpart narrowed to $7.55 per barrel on Thursday, down from $7.63 on Wednesday, based on closing prices.

US crude headed for the longest rally in a year after a government report showed a further drop in supplies at Cushing, while the nations distillate fuel inventories slid for a sixth week, albeit less than expected. The Energy Information Administration reported that distillate stockpiles fell by 339 000 barrels last week to 112.7 million, trailing the median estimate of 10 analysts surveyed by Bloomberg for a 2.1-million decline, but remained well below the lower limit of the average range for this time of the year. Motor gasoline supplies rose by 0.3 million barrels, defying expectations for a drop of 850 000 barrels.

Crude inventories increased by 973 000 barrels in the seven days through February 14th, outperforming analysts forecasts for a 2.25-million barrels build. Moreover, supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, declined by 1.7 million barrels last week to 35.9 million, the lowest level since October, as the southern leg of TransCanadas Keystone XL pipeline began delivering oil from the hub to the Gulf Coast in January.

Prices are expected to remain supported in the short-term as temperatures from the Midwest to the Northeast will be below the average from February 25th to March 5th, according to the National Weather Service’s Climate Prediction Center.

A weak dollar, which fell to a seven-week low against the euro earlier in the week, also supported commodities across the board. The US dollar index, which measures the greenbacks performance against a basket of six major currencies, traded at 80.40 at 7:46 GMT, up 0.10% on the day. The March contract rose by 0.16% on Thursday and is up 0.2% on weekly basis after it declined by 1.5% in the previous two weeks.

The oil complex continued to draw support as protests in Venezuela against President Nicolas Maduros socialist government escalated on Thursday, putting at risk the OPEC members output rate.

Reduced output in Libya and South Sudan also kept the market underpinned. South Sudan has cut its oil output to 170 000 barrels per day even before the rebel strike on Malakal, an official said for Reuters. Production in the neighboring Unity state was reduced by 45 000 bpd earlier in the conflict.

US manfuacturing

Preliminary data which showed on Thursday that manufacturing activity in the US accelerated at the fastest pace in nearly four years also boosted demand prospects in the worlds top consumer. Markits preliminary Purchasing Managers Index rose to 56.7 in February, confounding expectations for a slowdown to 53.0 from Januarys final reading of 53.7.

The data however came after a private report showed that manufacturing activity in China, the world’s second biggest economy and oil consumer, fell to a seven-month low, marking a second month of contraction. The HSBC Flash China Manufacturing PMI slid to 48.3 in February, down from January’s final reading of 49.5, underperforming expectations for a minor-to-no change from the previous month. The Flash China Manufacturing Output Index registered at 49.2, compared to 50.8 in January, also a seven-month low. All of the PMI survey’s sub-indexes marked a decrease from the previous period.