Crude-oil futures early Friday in New York popped higher, on pace to book weekly gains, as investors focused on tightening inventories, including signs of shrinking output from Iran, according to market participants.
Overall momentum for crude prices has been tilted to the upside against a weakening dollar that has also contributed to the mostly bullish weekly trend for crude futures.
West Texas Intermediate crude for October delivery CLV8, +1.25% added 91 cents, or 1.3%, to $68.74 a barrel on the New York Mercantile Exchange, a day after the U.S. benchmark halted a five-session string of gains.
October Brent crude LCOV8, +1.20% picked up $1.04, or 1.4%, to $75.77 a barrel on the ICE Futures platform, a day after the global benchmark snapped a similar streak of price advances.
For the week, WTI is on track to book a roughly 4% climb for the most-active contract, while Brent oil is set to log a 3.8% weekly advance, according to FactSet data.
Robert Yawger, director of energy at Mizuho USA, told MarketWatch that reports that U.S. sanctions on Iran, which don’t come into full force until Nov. 4, already are translating into diminished production from the Islamic Republic weighed on prices.
“Iran numbers exports have already been reduced a bit,” Yawger said.
Analysts at Cowen expect to see a 900,000-barrel to 1.6 million-barrel reduction in Iran exports, but those analysts also estimated a pick up in output from other members of the Organization of the Petroleum Exporting Countries.
Matt Smith, director of commodity research at ClipperData, said his firm was seeing evidence of a tail off in Iranian crude into Europe and into south Asia. “I think it just happens quicker than people expected it to. With certain buyers saying that they are not going to import Iranian crude even though sanctions won’t kick in until November,” he said.
The ClipperData analyst also said technical factors were also buttressing crude’s rally.
“I think the market is trading fairly technically at the moment, with WTI testing its 200-day moving average and that level acting like a trampoline,” Smith said.
WTI touched a low of $65.01 a barrel in mid August, compared against its 200-day MA of $64.71 a barrel, until rebounding sharply higher since that point, according to FactSet data. Market technicians tend to use moving averages to determine bullish and bearish momentum in an asset.
A weaker dollar also has offered some buoyancy to dollar-pegged crude futures, with the ICE U.S. Dollar Index DXY, -0.28% a popular dollar gauge, down 0.7% so far this week, making assets priced in the commodity more attractive to buyers using other monetary units.
Stalled discussions between the U.S. and China also grabbed the market’s attention. Midlevel Beijing and Washington officials repeated talking points during the preliminary talks but no immediate agreements were reached, according to The Wall Street Journal, citing people closely tracking the meetings. China’s Commerce Ministry called the meeting “constructive and frank” in a statement.
The negotiations to end protracted tariff disputes come as the two countries imposed tariffs on an additional $16 billion of each other’s imports, bringing the total amount of goods under each country’s levies to $50 billion. Intensifying disputes between the economic superpowers could hurt demand for crude, market participants have warned.
Looking ahead, crude investors will watch a weekly report on rigs drilling for oil in the U.S. from Baker Hughes BHGE, -0.65% after virtually no change to rig-counts at 869 last week. The report offers a peek into the direction of U.S. crude output, and would follow a series of reports that have thus far indicated a tightening trend which has been bullish for prices.
On Wednesday, the Energy Information Administration reported that domestic crude supplies fell by 5.8 million barrels for the week ended Aug. 17. Analysts surveyed by S&P Global Platts had forecast a fall of about 3.4 million barrels.
Many investors on Wall Street will be following a gathering of central bankers in Jackson Hole, Wyo., where Federal Reserve Chairman Jerome Powell will provide more details about the U.S.’s monetary policy strategy and the health of domestic and global economy, which could influence sentiment in the energy complex.
Powell is set to deliver a speech at around 10 a.m. Eastern Time.
Read: Fed’s Powell may use Jackson Hole speech to discuss strategy for the next downturn
Elsewhere, September gasoline RBU8, +0.88% added 2 cents, or 0.9%, to $2.079 a gallon, September heating oil HOU8, +1.06% rose by 3 cents, or 1.2%, to $2.201 a gallon.
September natural gas NGU18, +0.07% gained less than 0.1% to $2.966 per million British thermal units. The EIA on Thursday said domestic supplies of the commodity rose by 48 billion cubic feet for the week ended August 17. Market consensus had called for a rise in the 50 billion to 55 billion cubic foot range, according to Schneider Electric.
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