Oil weekly recap, November 11 – November 15

West Texas Intermediate crude settled lower on Friday and capped a sixth consecutive weekly decline, the longest losing streak since 1998, as U.S. inventories rose for an eight straight week after output surged to the highest since January 1989. Speculations the Federal Reserve will refrain from paring its monthly bond purchases for some time following a series of downbeat U.S. data and supporting comments by Fed Vice Chairwoman Janet Yellen couldnt offset the effect of increasing supplies but limited losses. Brent settled the week higher supported by recurring protests in Libya and as Iranian diplomats and their counterparts from six world powers failed to reach an agreement over the Islamic republics nuclear program at talks in Geneva last week.

On the New York Mercantile Exchange, WTI crude for delivery in December fell by 0.04% on Friday and settled at $93.73 per barrel. Prices held in a days range between $94.52 and $93.61 a barrel. The U.S. benchmark closed the week 0.7% lower, marking a sixth consecutive weekly decline, the longest losing streak since 1998.

Meanwhile on the ICE, Brent futures for settlement in January rose by 0.07% to $108.36 a barrel on Friday. Prices surged to a days high of $108.66 a barrel, near Thursdays two-week high, while days low stood at $107.70. The European benchmark rose in four out of five days this week and settled 3.2% higher, offsetting the previous two weeks combined decline of 2% and raising the premium to WTI to eight-month-high levels.

WTI crude was pressured after the Energy Information Administration reported on Thursday that U.S. crude stockpiles rose for an eight consecutive week to the highest since June. Crude inventories jumped by 2.6 million barrels in the week ended November 8, exceeding more than three times an anticipated 800 000 barrels increase, according to a Bloomberg survey of analysts. Supplies rose to 388.1 million barrels, the highest since June, while output surged to the highest since January 1989. Refineries operated at 88.7% of their operable capacity, up from 86.8% a week earlier. Inventories at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, rose by 1.7 million barrels to 38.2 million. Supplies at the hub have climbed for five consecutive weeks, the longest streak since January.

The report also showed that both gasoline and distillate fuel production rose last week, averaging 9.4 million and 4.9 million barrels per day, respectively. Motor gasoline stockpiles fell by 838 000 barrels and were above the upper range for this time of the year. Analysts expected a decline of 900 000 barrels. Distillate fuel inventories slid by 481 000 barrels compared to projections for a 1 million decline and remained near the lower limit of the average range for this time of the year.

Bob Yawger, director of the futures division at Mizuho Securities USA Inc., commented yesterday for Bloomberg: “Cushing supplies rose about 1.7 million barrels in yesterday’s report and have gained 5.6 million barrels since Oct. 4, which are huge numbers for the delivery point. There can be short-term rallies but WTI will have a hard time getting though $95 after the big gains at Cushing.”

Fed stimulus

Losses were however limited after a string of downbeat U.S. data in the past couple of days backed Fed Vice Chairwoman Janet Yellens comments at a Senate hearing for maintaining the current pace of the central bank’s monthly bond purchases.

A report by the Labor Department showed on Friday that prices of U.S. imports fell by 0.7% in October, underperforming expectations for a 0.4% decline. Year-on-year, the import price index plunged by 2.0%, sharper than an anticipated 1.6% decline and trailing the preceding month’s 1.0% contraction. The drop in import costs was mainly based on a 3.6% fall in inbound oil shipments, the biggest decline in more than a year.

Meanwhile, the report also showed that export prices unexpectedly fell by 0.5% in October, a seventh monthly retreat in eight, indicating a worrisome global economic weakness. The decline suggested that major trading partners, including Europe, are struggling so much that U.S. exporters have little room to raise prices.

According to a separate report, manufacturing activity in the New York Region unexpectedly contracted by the most since January as new orders fell. The NY Empire State Manufacturing Index declined by 2.21 in November, defying analysts’ expectations for a rise to 5.00 from the preceding period’s reading of 1.52. The new orders index slumped to -5.33, down from 7.75 in October. Labor market conditions also worsened with the employment index falling to 0.00 from 3.61 in the preceding month.

A separate report by the Federal Reserve showed U.S. industrial production also surprisingly contracted last month. Output fell by 0.1%, confounding projections for a 0.2% advance after it expanded by 0.7% in September.

Capacity utilization also disappointed and fell to 78.1%, trailing both expectations and September’s reading of 78.3%.

This comes after President Barack Obamas nominee for next Federal Reserve Chief, Janet Yellen, said at a Senate hearing on Thursday she’ll press on with Fed’s massive quantitative easing program until she sees a robust economic recovery. Yellen said she doesn’t see evidence at this point that the current policy is inflating assets bubbles, further curbing speculations for an earlier-than-expected tapering of the stimulus.

In her prepared comments prior to the hearing, Yellen called last month’s 7.3% unemployment rate too high, noting the economy and labor market were performing short of their potential, while inflation remained well below Fed’s 2% target and provided room for easy money supply.

Also fanning negative sentiment for the U.S. economic recovery, the Labor Department reported on Thursday that more people than expected applied for initial unemployment benefits last week. Initial jobless claims fell to 339 000 in the week ended November 9, underperforming expectations for a drop to 330 000.

According to a Bloomberg survey of analysts, U.S. crude will likely advance next week on speculations the Federal Reserve will leave its stimulus intact for some time. Nine out of 23 participants polled wagered prices will rise next week, while eight were bearish and the remaining six predicted no significant change.

Iran, Libya

The oil market, and mostly Brent, drew support throughout the week after Iranian diplomats and their counterparts from six world powers failed to reach an agreement over the Islamic republic’s disputed nuclear program last week in Geneva.

Iran said on Monday it will grant U.N. inspectors “managed access” for inspections on some key points of its nuclear program as a sign it is willing to grant concessions. The International Atomic Energy Agency was permitted access to inspect Iran’s largest uranium mine and a heavy-water plant. Despite the show of good faith, investors don’t expect any additional barrels of Iranian oil to return to the market any soon.

However, negotiations are set to resume on November 20. U.S. Secretary of State John Kerry said in the beginning of the week he hoped for an agreement over Iran’s nuclear program within months. Meanwhile, both Brent and WTI benchmarks were pressured on Friday following reports that a senior U.S. official said a deal with Iran was “quite possible” next week when the two sides meet again in Geneva, paving the way for the return of more than 1 million bpd of oil to the global market.

Meanwhile, ongoing protests in Libya, Africa’s biggest crude reserves holder, continued to underpin prices. Output fell to an average of 450 000 barrels of oil per day in October, down from 1.45 million bpd a year earlier, data by Bloomberg showed.

Ibrahim Al Awami, the Libyan oil ministry’s head of measurement and inspection, said on Wednesday that protests kept the Zawiya refinery closed for more than a day, leaving its 120 000 bpd capacity offline. The port was later reopened after the demonstration had come to an end.

Mohamed Elharari, a spokesman for state-run National Oil Corp., said for Bloomberg on Wednesday that 300 protesters stopped a tanker from loading at the Hariga port, indicating the government continues to be unable to regain its grip.

Recent protests in Libya cut the country’s natural gas exports to Italy. Paolo Scaroni, chief executive at Italian oil and gas group Eni said production has fallen to 60% of capacity since the start of the year.

“It’s very much out of control… It’s getting worse… but I have reasons to be optimist on the future,” Paolo Scaroni said for BBC.