Oil weekly recap, February 10 – February 14

West Texas Intermediate crude settled above $100 on Friday and posted its fifth consecutive weekly advance, the longest rally in more than a year, as better-than-expected US consumer confidence offset a contraction in the countrys industrial production. A decline in US fuel inventories, further withdrawals in stockpiles at Cushing, Oklahoma, and tighter supplies from Libya and Angola supported the market, offsetting weak US retail sales and jobless data earlier in the week.

On the New York Mercantile Exchange, WTI crude for delivery in March fell by 0.05% on Friday to settle at $100.30 a barrel after shifting in a daily range between $99.43 and $100.47 a barrel. The US benchmark settled the week 0.4% higher, a fifth straight weekly advance, the longest winning stretch in more than a year.

Meanwhile on the ICE, Brent futures for settlement in April jumped by 0.5% to settle the day at $109.08 a barrel after holding in a daily range between $109.25 and $107.85 a barrel. The European benchmark added 0.2% on Thursday and settled the week 0.3% lower. Brents premium to its US counterpart widened to $8.95 per barrel, up from $8.47 a day earlier.

The oil market was pressured on Friday after the Federal Reserve reported that industrial production in the US contracted by 0.3% in January, confounding analysts expectations for a 0.3% growth, which would have matched Decembers expansion rate. Manufacturing output slid by 0.8%, missing analysts projections for a minor 0.1% advance. The data exacerbated previous weak economic readings from the US and was attributed to the cold weather last month which impaired production at assembly lines.

However, better-than-expected consumer confidence in the US spurred bullish sentiment and helped offset losses. The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 81.2 in February, defying analysts forecasts for a drop to 81.5 from Januarys final reading of 81.2. The surveys six-month expectations index jumped to 73 from 71.2 last month.

The sentiment figures gave a much needed support after the Commerce Department’s Census Bureau reported earlier in the week that retail sales in the United States surprisingly contracted by 0.4% in January, confounding economists’ forecasts for a 0.3% increase. December’s reading received and upward revision to show a 0.2% growth, up from initially estimated at -0.1%.

A separate report by the Labor Department reported that the number of people who filed for initial unemployment benefits in the week ended February 8th rose to 339 000, defying analysts’ projections for a drop by 1 000 to 330 000 from the previous period.

Inventories levels

Upbeat inventories data however kept the oil complex underpinned throughout the week. On Wednesday, the EIA reported a fifth consecutive decline in US distillate fuel inventories, albeit smaller than projected, while supplies at Cushing dropped for a second week. Distillate supplies, which include diesel and heating oil, fell by 0.73 million barrels to 113.1 million in the seven days through February 7th, trailing the median estimate of 10 analysts surveyed by Bloomberg for a 2.13-million drop.

US crude inventories rose by 3.27 million barrels last week to 361.4 million, compared to expectations for a 2.6-million increase. However, supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, plunged to 37.6 million barrels from 40.3 million a week earlier.

Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said, cited by Bloomberg: “People are focusing on Cushing due to the Keystone pipeline. Cushing inventories are likely to continue to fall.”

Also helping limit losses, output at Libya’s El Sharara oilfield fell after protesters shut a pipeline carrying oil to the western Zawiya terminal. As a result, nationwide output has fallen by 100 000 barrels per day since Tuesday.

Additional supply concerns were raised after BP declared force majeure on exports of Plutonio crude from Angola yesterday. People familiar with the case said for CNBC that the field will undergo a maintenance in March, keeping a capacity of 180 000 barrels per day.

Unexpectedly upbeat China trade data also fanned positive sentiment as the countrys exports and imports exceeded projections, while crude imports rose to a record 6.63 million barrels per day, up 11.9% from a year earlier, amid the opening of two refineries and a petroleum reserve cite. Benign inflation numbers were also supportive.

Long-term demand prospects offered support as well. The Energy Information Administration raised its global demand growth forecast, while also trimming its projections for US crude output in the next two years. The government agency cut its domestic crude production forecast for 2014 by 100 000 barrels per day to 8.4 million and by another 100 000 bpd to 9.2 million in 2015.

Meanwhile, the EIA revised up its forecast for world demand growth by 50 000 bpd to 1.26 million bpd in 2014, reflecting the global economy’s recovery state.

EIA’s upward revision was backed by OPEC as the group also predicted a larger demand growth this year compared to its previous estimate. The Organization of the Petroleum Exporting Countries said in its monthly report that global demand will rise by 1.09 million barrels per day in 2014, 40 000 bpd above its previous estimate and sighted a possibility for further improvements.

The group expects contraction in European demand to ease in 2014, while preliminary data from the last two months signaled strong consumption levels in the US.

On Thursday, the International Energy Agency released data showing that oil inventories in the developed nations fell by 1.5 million bpd in the fourth quarter of 2013, the sharpest decline in 15 years.