U.S. benchmark crude mustered a modest gain, but ended well below the high of the trading session as market participants weighed fresh data. The Federal Reserve said U.S. industrial production rose 0.7% in February, exceeding economists’ forecasts and eclipsing concerns over a sharp drop in consumer confidence and a rise in consumer prices.
The Thomson-Reuters/University of Michigan consumer sentiment index fell to 71.8 in mid-March, its lowest level since December 2011 and down from 77.6 in February. Economists have expected the reading to move up to 78. Also Friday, the Labor Department said the consumer price index in February rose 0.7%, the biggest gain since June 2009, led by higher gasoline prices.
“We are seeing some strong signs, but whether they are strong enough is still up in the air,” said Gene McGillian, analyst and broker at Tradition Energy. He noted that oil prices have recovered from two-month lows below $90 a barrel hit early this month, but said it’s unclear whether economic and oil-market fundamentals can sustain a further rally.
Light, sweet crude oil for April delivery on the New York Mercantile Exchange settled 42 cents higher, at $93.45 a barrel. That’s the highest price since Feb. 20, but well below the session high of $93.84 a barrel.
ICE North Sea Brent for May delivery, in its first day as the front-month contract, settled 86 cents higher, at $109.82 a barrel. Traders said the contract found buyers after front-month prices hovered near the 200-day moving average price, a key indicator for chart-based trading, near $109.40 a barrel in recent days.
News that Norwegian oil producer Statoil shut its North Sea Oseberg oil field on Thursday after a power outage and gas leak also kept Brent supported. Oseberg is expected to supply 3.6 million barrels of crude during April, and analysts said they will be watching developments for signs of any shortfall. The output snag comes as North Sea flows have recovered from earlier operating problems.
U.S. crude oil gained as market participants ignored lofty crude oil stocks and sluggish oil-demand growth. The latest data from the Energy Information Administration show refinery maintenance has slowed crude oil processing to a two-year low and pushed crude oil inventories to more than 40 million barrels above the five-year average. Inventories of 384 million barrels are sufficient to cover more than 27 days of refiner needs, the highest level in 21 years.
Analysts said investors appear to be taking the view that crude inventories will decline when maintenance ends and refineries ramp up output of gasoline and diesel fuel.
Days before a trip to the Middle East, President Barack Obama said it would take Iran a year or more to build a nuclear weapon, an assessment that sets up a potential area of discord with Israel’s leader. The president’s timelime is longer than the more urgent one usually cited by Israeli Prime Minister Benjamin Netanyahu. The timeline, the first publicly given by Mr. Obama, appeared to be tamping down any expectations for pre-emptive action against Iran while aiming to assure its closest Mideast ally of U.S. support.
Iran had been the second-biggest oil producer in the Organization of the Petroleum Exporting Countries, but international sanctions over its nuclear program have cut flows to their lowest level in 30 years.
April-delivery reformulated gasoline futures settled up 2.25 cents at $3.1638 a gallon after falling 1.9% in the prior four days. April heating oil settled up 0.95 cent at $2.939 a gallon.
*David Bird, Rigzone