The United States benchmark, the West Texas Intermediate (WTI), has appreciated for the ninth consecutive week, extending its winning streak as market attention turned to the U.S. storage hub for crude, which is at a three-year low.
This comes even as natural gas and coal prices that supported the rally in energy turned lower on the week.
The U.S. WTI benchmark gained 1.80% for the week, to settle at $83.76 a barrel. WTI fell to as low as $80.79 during the week but on Friday it reached a peak of $84.25. For nine weeks, WTI has gained a total of 34%.
The global benchmark, the London-traded Brent crude futures, gained 0.79% for the week, to settle at $85.53 per barrel. Brent hit a three-year high of $86.10 on Thursday. For seven weeks, the global benchmark has gained approximately 15%.
What you should know
Crude prices had their steepest drop in two weeks on Thursday after Russian President Vladimir Putin said the Organization of Petroleum Exporting Countries and their allies (OPEC+) might put out more barrels than it has announced.
Oil prices were also down as China, India and other top oil consumers fought back against high energy prices which they said could ruin their economies with runaway inflation. Adding to the pressure on energy markets were forecasts showing much of the United States will have a warmer-than-average winter. These factors had caused natural gas and coal prices to unwind from their highs of recent weeks.
Even with those declines, the oil market rebounded strongly on Friday as the focus returned to plummeting inventories at the Cushing, Oklahoma, storage hub for crude. In its weekly inventory update on Wednesday, the U.S. Energy Information Administration (EIA) put the Cushing stocks at 31.2 million barrels, down from the previous week’s three-year low of 33.6 million.
The EIA also reported that crude stockpiles declined by 431,000 barrels in the week to October 15, compared with analysts’ expectations for a build of 1.857 million barrels.
Scott Shelton, energy futures broker at ICAP, in Durham, North Carolina stated, “The issue is that there is not going to be any opportunity to restock Cushing in the next 3-5 months as runs should stay high. But it will be a volatile trade.”
It was the first time in a month that the EIA had reported a weekly drop in crude stocks after the previous back-to-back builds that added about 13 million barrels to inventories.
Crude wasn’t the only component of the report to register declines. Gasoline inventories fell by 5.368 million barrels, compared with expectations for a draw of 1.267 million barrels and stockpiles of distillates, which include diesel and heating oil, slid by 3.913 million barrels in the week against expectations for a draw of 700,000 barrels