West Texas Intermediate (WTI) and Brent crude oil prices finished the week in an upward direction.

November WTI futures added 36 cents Friday to settle at $52.81 per barrel. The contract peaked at $53.35 and bottomed out at $52.29. Against the September 27 settlement, WTI is down 5.5 percent.

The December Brent contract posted a 66-cent gain to close at $58.37 per barrel. For the week, Brent is down 5.7 percent.

“After a 12-session downtrend, both WTI and Brent moved into positive territory to end the week on a higher note as demand worries and the restoration of Saudi production took center stage and as a solidly bearish inventory report kept prices lower earlier in the week,” said Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business.

Seng noted the downtrend immediately followed the major rally sparked by the Sept. 14 attacks on key Saudi oil assets, adding that the decline continued until Friday.

“Saudi Arabia announced that they had restored their production to the 11 million-plus barrel per day pre-attack level,” he said. “In addition, the Kingdom stated they did not see any value in retaliation at this time should it lead to an out-and-out war in the region, further dampening market conditions about future supply disruptions.”

Crude prices stand well below levels immediately before the attacks, having erased the 15-percent gain from that rally, Seng observed.

“With supply concerns abated, the market looked to sagging global economic indicators with concern about oil demand,” continued Seng. “Asian and European stock markets were lower this week largely on lower manufacturing and purchasing indexes. And, while trading positive today, all three major U.S. stock indices are lower on the week after the Institute for Supply Management reported lower indexes for both the manufacturing and service sectors.”

Citing the latest Weekly Petroleum Status Report from the U.S. Energy Information Administration (EIA), Seng pointed out that federal energy statistics provider reported:

• A 3.1 million-barrel increase in commercial crude inventories last week, compared to forecasts of a 1.2 million-barrel build and an American Petroleum Institute report’s 5.9 million-barrel draw projection
• 423 million barrels of total crude in storage – at the five-year average for this time of year
• A 200,000-barrel decrease in oil inventories at the Cushing, Okla., hub, down to 40.7 million barrels total (approximately 40 percent of capacity)
• Refinery utilization down to 86.4 percent, or 16 million barrels per day (bpd) and representing a 500,000-bpd decrease
• A 15.7-percent decline in oil imports from the year-ago level
• A decline in U.S. oil production to 12.4 million bpd
• A new daily average high for U.S. exports of crude oil at 3.2 million bpd, with current exports remaining around the 3 million-bpd mark.

Seng also noted the WTI/Brent spread has widened to the $5.70 level. He added the November WTI NYMEX futures contract turned higher Friday on technical indicators and is now trading near its five-day moving average but below its 10- and 20-day moving averages.

“The contract is in an oversold position relative to overbought/oversold conditions according to momentum indicators,” said Seng. “Today’s volume is stronger at around 500,000 contracts. The combination of prices below the averages and the oversold conditions allowed for what is known as a ‘three-day, head-and-shoulders’ reversal pattern.”

Reformulated gasoline (RBOB) also edged upward Friday. November RBOB ended the day at $1.57 per gallon, reflecting a nearly two-cent jump for the end-of-week session.

“U.S. inventories of total gasoline are still around 230 million barrels, on the high end of the five-year average for this time of year despite a drop in production last week,” said Seng. “Average U.S. retail prices were 22 cents per gallon lower than last year at $2.64 per gallon while NYMEX futures prices are about 45 cents per gallon less than a year ago at $1.65 per gallon.”

Henry Hub natural gas for November delivery finished the day higher as well, gaining two cents to settle at $2.35. For the week, gas futures are down 2.1 percent.

"November natural gas rebounded yesterday and today after a 12-day downtrend of its own that even the latent summer heat could not stop as production continues to outpace demand while the storage report showed near-normal demands,” Seng commented, referring to Thursday’s EIA Weekly Natural Gas Storage Report. “This was the longest losing streak for natural gas going back to 1990.”

Seng also noted the latest EIA gas inventory report showed:

• An injection of 112 billion cubic feet (Bcf) against forecasts calling for 101 Bcf, indicating less demand – or more supply – than expected
• 3.32 trillion cubic feet of total gas in inventory – 16.3 percent higher year-on-year but 18 Bcf (0.5 percent) lower than the five-year average, essentially erasing the gap
• 94 Bcf per day (Bcfd) of dry gas production last week compared to 83.8 Bcfd consumption, with a slight uptick in residential usage and export volumes
• Gas exports to Mexico at 5.4 Bcfd and LNG exports at 6.3 Bcfd

“Technically, November natural gas is trading right at its five- and 10-day moving averages but below its 20-day moving average,” concluded Seng. “Momentum indicators are showing a solidly oversold condition.”

(From Rigzone)