Crude oil futures weekly recap, September 22 – September 26

WTI futures logged sizable gains this week, while Brent fell, closing the gap between the two brands to the least in more than a year. Supportive US economic data buffed WTI while abundant global supplies and a discount of Mid-Eastern risk premium pressured Brent.

WTI crude for delivery in November on the New York Mercantile Exchange added 1.09% on Friday to settle the week ~2% higher at $93.54 a barrel. Meanwhile on the ICE, Brent November futures were unchanged on Friday to close at $97.00 a barrel, registering a 1.4% weekly gain. November Brent’s premium to its US counterpart narrowed to the least in a year at $3.46.

“Improving U.S. economic conditions should improve the fundamental outlook here,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said for Bloomberg. “The market is trying to stabilize. We still have a lot of supply out there and that’s weighing on the overall market.”

Final readings on US GDP growth for the second quarter of 2014 were released this week, meeting expectations of a 4.6% growth on an annual basis, logging a 4.1/2-year high and reinforcing confidence in the recovery of the US economy, which accounts for 21% of global oil demand.

More positive economic data on housing, durable goods orders and jobless claims further supported outlooks for the US economy, but also strengthened the dollar. A pricier US currency depletes the investment appeal of all dollar-denominated commodities, such as oil, making them more expensive to holders of other currencies.

Meanwhile, surprise draws at US crude inventories proved quite supportive earlier this week. The EIA report, which covers the week through September 19th, revealed crude stocks had lost 4.3 million barrels, as compared with expectations of a 0.7m-1m draw. The draw also marks the 14th weekly decrease out of 17, and is the biggest weekly decrease since mid-July.

Production of crude logged a minor increase, however, to set a new highest level for the past 28 years at 8.867 million barrels per day, signaling that ample supplies will be weighing on contracts for a considerable time.

China, Eurozone

HSBC and Markit posted their preliminary figure on Chinese manufacturing PMI, logging at 50.5, above expectations also above the “50.0″ mark, signaling the sector has expanded in September. Factories are the bulk contributors to Chinese industrial output, which generates about 44% of the country’s GDP. At the same time, however, goods, such as those produced in factories, need to be physically transported, while factories tend to consume a lot of power and other fuels, hence the manufacturing PMI figure is a key leading gauge for oil demand.

The second-top economy in the world is also the second-top oil consumer, and will account for 11% of all demand this year, the International Energy Agency (IEA) says.

Meanwhile, manufacturing PMI figures for the Eurozone were also posted. France reported a surprisingly smaller than expected contraction in the factory sector, though still logging a decrease in activities, while Germany posted disappointing growth in the sector. Bloc-wide figure was recorded as expected, at 50.5. Although the industrial sector is just ~25% of the Eurozone’s economy, it still constitutes a massive chunk of transportation fuel demand. The EU consumes ~13% of all oil.

Middle East, OPEC

The broadening of action against ISIS was thought to widen the risk premium in crude prices, but it has so far failed to spook markets. Investors seem to regard the actions as positive for the security of the region.

Meanwhile, Iraq, OPEC’s second-top oil exporter and the most-hurt by ISIS country, actually logs increasing outbound shipments. Libya, also an OPEC member, also clocks soaring production after operations at its largest oilfield were resumed.

The growth in OPEC production adds to ample global supplies, which weighed on prices recently. Earlier this month, both the International Energy Agency (IEA), which consults developed nations on oil, and OPEC lowered projections of crude demand next year.

The forecasts produced speculation of an imminent OPEC output cut, as traders expect the cartel to move in the defense of the key $100 per barrel price level.

OPEC official moved to dispel speculation about a cut, but the group did lower its marketable oil expectations for 2015, signaling a decrease in production could follow as to meet market demand.

In a note released Wednesday, Citigroup lowered its 2015 forecast for WTI prices by $10 a barrel to $89.50, and by $7.50 a barrel to $97.50 for Brent.

Next week

Next week will offer plenty of data for traders to gauge oil demand and growth outlooks in top economies.

Key US employment data and a European Central Bank meeting will highlight the important events due through October 3rd. More US housing data, factory orders and a key consumer confidence gauge, alongside retail sales, employment and CPI figures for the EU will cover a plethora of economic activities on both sides of the Atlantic.

Meanwhile, China, the worlds second-top oil consumer, will also have key PMI figures posted.

Do you think China and EU data will support Brent next week?

Let us know in the comments below.