Oil Ends Sharply Higher, With U.S. Prices Down a Third Week In A Row

Oil prices shifted higher Friday, jumping about 3% in a surprise rally for the session on the back of unconfirmed reports of a unit shutdown at one of the largest oil refineries in the U.S., as well as data showing a weekly fall in the number of active domestic oil rigs.

According to some news reporters, a unit at Exxon Mobil Corp.’s XOM, +0.50% Baytown, Texas refinery has been closed. MarketWatch, however, has been unable to reach a spokesperson by phone to confirm.

“This is a monster refinery—the second largest oil refinery in the United States,” said Phil Flynn, senior market analyst at Price Futures Group, adding that it has a capacity of 584,000 barrels a day. “The loss [according to the unconfirmed reports] of this refinery may have others scrambling to make up the difference, raising the bid on heavy oil that is getting a bit more difficult to find.”

James Williams, energy economist at WTRG, meanwhile, noted that the market may have experienced volatility linked to the coming expiration of the September futures contracts. Tuesday is the last day of trading for the September West Texas Intermediate futures contract.

And Tariq Zahir, managing member at Tyche Capital Advisors, said the late-morning rally for oil followed a shift in U.S. equities, which came on the heels of “drama” in Washington, D.C. The White House on Friday said Stephen Bannon, will leave his position as President Donald Trump’s chief strategist.

“Some weekly short positions could have been liquidating, accelerating a rally as well,” said Zahir. But “as long as [WTI] crude hits resistance near $50, we believe this $45-$50 range will be tight through the end of summer.”

Prices had traded lower earlier in the session, pressured by recent data showing a rise in U.S. crude production to its highest level in more than two years.

West Texas Intermediate crude for September delivery CLU7, +3.48%  jumped $1.42, or 3%, to settle at $48.51 a barrel after trading as low as $46.78. The contract, which expires at Tuesday’s settlement, cut its loss for the week to 0.6%, FactSet data show.

September gasoline RBU7, +2.27%  also rose 3.7 cents, or 2.3%, to $1.624 a gallon, with prices turning higher by 0.7% for the week.

October Brent LCOV7, +3.59%  on London’s ICE exchange rallied $1.69, or 3.3%, to $52.72 a barrel. It erased its loss for the week and gained 1.2% from last Friday’s finish.

The Energy Information Administration on Wednesday reported a drop in weekly U.S. crude supplies that was the largest since September of last year, but it also said production rose for the week to its highest level since mid-July 2015.

On Friday, Baker Hughes BHGE, -0.09%  reported a weekly decline in the number of active U.S. rigs drilling for oil—a key metric for drilling activity. It fell 5 to 763 rigs this week.

Back on Nymex, September heating oil HOU7, +2.67%  rose 3.8 cents, or 2.4%, to $1.620 a gallon, but ending around 0.9% lower on the week.

September natural gas NGU17, -1.50%  declined 3.6 cents, or 1.2%, to $2.893 per million British thermal units. It was down about 3% for the week.

Courtesy : marketwatch