Futures Movers: Oil futures inch higher, with U.S. prices up over 5% for the week

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Oil futures inched higher on Friday, with U.S. benchmark crude prices settling more than 5% higher for the week, as news of progress on part of a U.S.-China trade deal eased concerns over a slowdown in economic growth and energy demand.

The U.S. Trade Representative’s office said the U.S. and China have come close to finalizing parts of the so-called phase one deal. The news provided a lift to assets deemed as risky, including oil, and U.S. benchmark stocks indexes climbed. The S&P 500 Index SPX, +0.40%  briefly traded above its all-time closing high.

West Texas Intermediate crude for December delivery CLZ19, +0.87%  on the New York Mercantile Exchange rose 43 cents, or 0.8%, to settle at $56.66 a barrel on the New York Mercantile Exchange. The front-month contract, which marked the highest finish since Sept. 24, tallied a 5.2% weekly advance, according to Dow Jones Market Data.

December Brent crude BRNZ19, +0.02%, the global benchmark, added 35 cents, or 0.6%, at $62.02 on ICE Futures Europe to post a weekly rise of 4.4%. Prices settled at their highest since Sept. 26.

The big driver for the week’s climb came from the surprise drop in U.S. oil and product inventories reported by the Energy Information Administration on Wednesday, said Warren Patterson, head of commodities strategy at ING, in a note.

The EIA on Wednesday reported that U.S. crude supplies fell for the first time in six weeks, down 1.7 million barrels for the week ended Oct. 18. Separately, supplies of oil from the U.S. Strategic Petroleum Reserve, or SPR, fell by 1 million barrels for the week. Petroleum products gasoline and distillate also saw declines in stockpiles.

“The U.S. crude draw ended a run of above average builds brought on by deep refinery maintenance and challenging export economics,” said Robbie Fraser, senior commodity analyst at Schneider Electric, in a daily note. “As the U.S. hovers near net exporter territory for combined crude and products, export volumes have become an increasingly key component of weekly inventory swings.”

Even so, “headwinds remain in the form of potential demand weakness with 2019 already showing a clear decline in demand growth from recent years,” he said. “The crude market continues to rely heavily on major emerging markets for new demand, which means high exposure to a slowing Indian economy and any negative impact to Chinese demand amid ongoing trade tensions.”

Meanwhile, disruptions to output in the North Sea earlier this week also contributed to oil’s trading tone, Patterson noted. News reports said workers from a North Sea oil platform were evacuated this week as a precaution following a structural inspection.

Data on Friday from oil-field services firm Baker Hughes BKR, +0.22% revealed a drop of 17 in the number of active U.S. rigs drilling for oil this week, to 696 rigs. That followed increases in each of the last two weeks.

Speculation is also swirling around the Organization of the Petroleum Exporting Countries and its allies, namely Russia, and their willingness to extend and deepen an agreement on output cuts that’s due to expire in April.

While Russian officials have expressed reluctance, such reticence has become almost a “rite of passage in the run-up to OPEC meetings,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.

Russian President Vladimir Putin’s recent visit to Saudi Arabia and the United Arab Emirates “yielded a host of lucrative new deals that should sufficiently compensate for curbing output,” she said. “While Saudi Arabia seems focused on ensuring all members honor their commitments, we think a deeper cut is very much a live option given growing demand concerns and domestic fiscal needs.”

Back on Nymex, November gasoline RBX19, +0.52%  added 0.6% at $1.673 a gallon—ending 3.1% higher for the week, while November heating oil HOX19, -0.37%  fell 0.3% at $1.9796 a gallon, for a weekly rise of 1.7%. November natural gas NGX19, -0.13%  edged down by 0.7% at $2.30 per million British thermal units, for a weekly loss of 0.9%.

The formation of Tropical Depression Seventeen on Friday serves are a reminder that the Atlantic hurricane season, which runs through Nov. 30, is far from over. Traders will watch for any possible disruptions to energy production in the Gulf of Mexico. The center of the cylone is expected to “move across the northwestern Gulf of Mexico this afternoon and then move over the northern Gulf cost [late Friday] or Saturday morning,” according to the National Hurricane Center.