21 August 2016, New York — Oil prices settled steady to higher on Friday, with U.S. crude posting its biggest weekly gain since March after surging nearly 25 percent in a little over two weeks, a rally analysts cautioned was not justified by fundamentals.
Crude futures have risen almost $10 a barrel since early August on speculation that Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries will agree next month to a production freeze deal with non-OPEC producers led by Russia.
The rally has propelled oil into bull market territory after technicals had it in a bear market early this month.
“We would argue that improved fundamentals are not a key reason for the recent price bounce,” analysts at Morgan Stanley said in a note. “Crude oil demand is anemic, gasoline demand has decelerated globally, and China crude oil imports are likely to decelerate.”
U.S. West Texas Intermediate (WTI) crude settled up 30 cents, or 0.6 percent, at $48.22 a barrel after reaching $48.75, its highest since July 5. For the week, WTI rose 9 percent, up for a second straight week and rising its most for a week since early March.
Brent crude closed just a penny lower at $50.88 a barrel, after scaling a two-month high at $51.22. Brent rose 8 percent on the week, rising for a third week in a row.
OPEC will hold an informal meeting in Algeria next month with outside producers led by Russia. Some have speculated about a production sharing deal, with Saudi Arabia helping stoke much of that perception despite scuttling a similar plan in April.
Others, including OPEC member Nigeria, do not think there will be a deal. Many analysts and traders also argue the current rally will not last.
“We feel that this month’s approximate $9 crude advance could easily be followed by an equivalent sized price decline next month,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
“The U.S. production factor has taken on a more bearish appearance as the oil rig counts have increased appreciably,” Ritterbusch said.
U.S. drillers this week added oil rigs for an eighth consecutive week, the longest recovery streak in the rig count in more than two years, data from oil services firm Baker Hughes showed.
Elsewhere, Iraq resumed pumping oil from fields operated by the state-run North Oil Company to Turkey at around 70,000 barrels per day, with plans to double the volume next week.
In Libya, the National Oil Corporation began to load a tanker with crude at the country’s eastern Zueitina port, which has been shut since November.
*Barani Krishnan; Ahmad Ghaddar in LONDON and Mark Tay in SINGAPORE; Editing by Dale Hudson & David Gregorio – Reuters