Oil prices jumped six per cent on Friday, heading for the largest weekly gain in a month, as drawdowns in US crude stockpiles fed hopes that a punishing global oversupply may be approaching a tipping point after nearly two years.
Brent crude futures were up $2.39 at $41.82 a barrel by 1:17 pm EDT (1717 GMT), hitting a session high above $42. The shutdown of the Keystone crude pipeline to Cushing, Oklahoma has supported prices this week. Crude also drew support when Russia said its crude output fell in April, as major oil producing countries prepared to meet in Doha on April 17 to freeze production. US gasoline and diesel prices rallied more than five per cent each.
US crude this year has drawn support from cheap gasoline pump prices and benign driving weather.
Ultra low sulfur diesel, also known as heating oil, rebounded this week on seasonally cold weather forecasts through late April.
Brent crude futures were up $2.39 at $41.82 a barrel by 1:17 p.m. EDT (1717 GMT), hitting a session high above $42.
US crude futures rose by $2.28 to $39.53 a barrel.
Earlier, it rose to nearly $40.
For the week, both benchmarks were on track to gain about 8 per cent, their most since the week ended March 4.
“We are starting to draw crude inventories in the US” said Scott Shelton, energy broker with ICAP in Durham, North Carolina. “Run rates are rising and US production is falling.”
“This is very different I think than what was expected. The market perceives that these draws may continue as the Keystone outage will increase the likelihood,” Shelton said.
U.S. crude stockpiles fell by nearly 5 million barrels last week versus analysts forecasts for a build of 3.2 million barrels, government data showed.
U.S. energy firms cut oil drilling rigs for a third week in a row, adding to the improving fundamentals.
The rally in U.S. crude aside, Brent's front-month contract has also been at its smallest discount to the second-month contract since January, indicating more upward potential for the European benchmark.
“We are continuing to cite the exceptional strength in the Brent curve structure as a bullish consideration to the entire energy spectrum,” said Jim Ritterbusch at Chicago-based oil markets consultancy Ritterbusch & Associates.
“You mix that with outages in Nigeria ... and put Doha on top of it, and your eyes are looking towards the tightening of the market,” said Bjarne Schieldrop, chief commodities analyst at SEB Bank in Oslo.
