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Futures Movers: U.S. oil benchmark posts highest finish since September 2014


Oil futures rallied on Friday to tally a seventh straight weekly rise, with the U.S. benchmark marking its highest finish since September 2014, as a harsh winter storm raged in the U.S., piling onto myriad supply worries.

“The latest upswing was triggered by a cold snap in Texas, which is fueling concerns about production outages in the Permian Basin, the largest U.S. shale play. A year ago, a period of extreme cold weather had caused massive disruptions to oil production there,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note to clients.

About 350,000 homes and businesses in states such as Tennessee, Arkansas and Texas were without power in the U.S. on Friday, due to a winter storm that brought freezing rain and snow. More heavy precipitation and ice was expected to hit the eastern portion of the country Friday.

West Texas Intermediate crude for March delivery  CL00, +2.09% CL.1, +2.09% CLH22, +2.09%  climbed by $2.04, or 2.3%, to settle at $92.31 a barrel on the New York Mercantile Exchange. That was the highest finish for a front-month contract since Sept. 29, 2014, according to Dow Jones market Data. For the week, prices traded 6.3% higher.

April Brent crude  BRN00, -0.21% BRNJ22, -0.21%,  the global benchmark, gained $2.16, or 2.4%, to $93.27 a barrel on the ICE Futures Exchange, marking the highest settlement since Oct. 2, 2014. Prices saw a weekly rise of 5.4%.

“Oil prices are rising more than fundamentals suggest,” said Shin Kim, head of supply and production analytics at S&P Global Platts, in emailed commentary. “Stocks are starting to build (even outside of China), refiners are heading towards maintenance season, and supply is growing at record rates,” supported in large part by U.S. shale growth resuming,” she said.

Still, there are soaring risks to supply, including the Russia-Ukraine crisis, OPEC+ capacity constraints, and financial interest in oil is strong, said Kim. Also “looming over markets is an Iran nuclear deal that could lift some pressure, or exacerbate it.”

On Wednesday, the Organization of the Petroleum Exporting Countries and its allies stuck with an initiative to boost production by another 400,000 barrels a day in March.

“The market had been relying on OPEC+ to gradually raise volumes, but had overestimated their ability to actually do so,” Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch.

OPEC member states have been unable to produce oil at their assigned quota levels — worsening the supply-demand deficit, he said.

Read: Why OPEC+ can’t hit its oil production targets—and what it could do about it

“As a result, the market has found itself stretched in all directions: multiyear low inventories among OECD countries, coupled with razor thin spare capacity anywhere –– and no signs of real investments in oil and gas projects,” said Raj. 

“Then you add geopolitical tensions to the mix, and you see why oil is headed to $100,” he said. Still, the path to $100 oil would likely require a “geopolitical triggering event.”  

““Now that spare capacity is so little, even the slightest tension can trigger spikes in oil prices.””

— Manish Raj, Velandera Energy Partners

“The only spare oil production capacity is now at the hands of the three usual suspects — Kuwait, Saudi Arabia and the United Arab Emirates, Raj said. “Now that spare capacity is so little, even the slightest tension can trigger spikes in oil prices.”

In other energy trading, March gasoline  RBH22, +1.05%  rose about 1.4% to $2.679 a gallon — ending 5.5% higher for the week, while March heating oil  HOH22, +1.14%  added nearly 1.3% to $2.875 a gallon, for a weekly rise of 6%.

Read: Some U.S. drivers may pay highest gasoline ‘prices of their lives’ this spring

March natural-gas futures NGH22, -7.34% fell 6.5% to $4.572 per million British thermal units, ending 1.4% lower for the week.

Also see: Coal’s not dead, and won’t be for years to come

Market Extra: Going live: Event planners are shouldering big financial risks as Corporate America looks to schmooze again this spring

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