Oil prices rose every day this week, their best since December, as renewed optimism about falling supply and rising demand refuel a rally.
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U.S. crude is bumping up against $50 for the first time in almost two months, retracing about half of the ground it lost during an unexpected selloff that started in March. Traders and analysts had widely predicted a rally toward $60 in part from continued demand growth and a new deal from exporters to cut output; these same factors are pushing oil higher now, though several months later than many expected.
"There's a lot of bullish factors for sure out here," said John Macaluso, trader at Tyche Capital Advisors LLC, which oversees $8 million in assets. He advised caution, but added that "if [U.S. production] subsides a little bit, that would be something that could push us over the top."
Light, sweet crude for September delivery settled up 67 cents, or 1.4%, at $49.71 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, gained $1.03, or 2%, to $52.52 a barrel on ICE Futures Europe. Both have had gains in 12 of the past 15 sessions, hitting their highest settlements since the last week of May.
U.S. crude gained 8.6% and Brent gained 9.3% for the week. That is their biggest weekly gain since the week ended Dec. 2, when the Organization of the Petroleum Exporting Countries announced a deal that would eventually include Russia and other major exporters and aim to cut output by around 1.8 million barrels a day.
While that deal seemingly failed to ease a glut for most of the year, there are signs that is changing. U.S. inventories have now fallen in 14 of the last 16 weeks, sometimes dramatically. Lower imports into the country have played a role, with Saudi Arabia intentionally lowering its shipments to the U.S. Imports from Saudi Arabia to the U.S. are now at a two-year low, down by about a third since January, data-tracking firm ClipperData said Friday morning.
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"It's providing some confidence to the market they really mean business here at trying to whittle down these inventories and rebalance the market," said Matt Smith, director of commodity research at ClipperData.
Demand also has been strong in the U.S. and abroad. U.S. gasoline demand is rising and likely to break record highs soon, ING Bank said Thursday. Gasoline and diesel futures have made the biggest gains of the month as refineries run hard, analysts have said. And U.S. exports showed a "meaningful increase" last week, Piper Jaffray Cos.' Simmons & Co. International said Thursday.
Mark Waggoner, president of brokerage Excel Futures, said he is tempted to bet against oil now that it is approaching two-month highs and long-term average prices. But demand has been strong, making him hesitant. And he is expecting another, unusual surge of gasoline demand from people in August going to see the first total solar eclipse in the continental U.S. since 1979.
"You're going to have a lot of people driving," Mr. Waggoner said Friday. "We're going to see bigger draws (from storage) like we saw this last week, and that's going to hold the price up."
Friday's updated rig count from Baker Hughes Inc. showed just two new rigs drilling for oil. The count is increasing at a much slower pace -- and has even decreased at times -- in recent weeks, a delayed reaction to the spring selloff. If that trend continues in weeks to come, that would be a sign that U.S. production is slowing and a rally can continue, Tyche's trader Mr. Macaluso said.
"What we will be looking for is if the growth has plateaued," said Gao Jian, an energy analyst at Shandong-based SCI International.
Gasoline futures gained 3.15 cents, or 1.9%, to $1.6761 a gallon. Gasoline gained 11.28 cents, or 7.2% for the week, its best since the week ended March 3. It has now gained 12% over a three-week winning streak, the largest three-week gains since early December.
Diesel futures gained 3.65 cents, or 2.3%, to $1.6397 a gallon. They gained 12.45 cents, or 8.2%, for the week, the best since the week ended Dec. 2. It has gained 13% over a three-week winning streak, the largest three-week gains since early December.
Jenny W. Hsu contributed to this article.
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(END) Dow Jones Newswires
July 28, 2017 15:58 ET (19:58 GMT)