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Oil futures give up early gains and settled lower on Friday, wrapping up first weekly loss after four straight positive weeks, as the recent run-up in prices allowed traders to exit their positions with healthy profits.
Prices were supported by a soft U.S. inflation report this week that raised hopes for a September rate cut by the Federal Reserve, feeding forecasts for higher energy demand, as well as a bullish U.S. inventories report showing larger than expected drawdowns in crude and gasoline stocks, and jet fuel demand on a four-week average basis was at its strongest since January 2020.
Friday’s producer price index report came in slightly above expectations, however, and concerns remain about demand from China, where data from the International Energy Agency showed oil demand contracting in April and May.
“Growing expectations of a rate cut from the Fed along with a constructive oil balance suggest that prices will remain well supported,” ING analysts said, according to Dow Jones. “We continue to hold onto our view that ICE Brent will average $88/bbl in the current quarter.”
The number of oil rigs is at its lowest level in two-and-a-half years, according to Baker Hughes, but the U.S. has been producing record amounts of crude, thanks in large part to drilling efficiency.
The EIA reported production of 13.3M bbl/day last week, and expects full-year output to average 13.2M bbl/day, and the agency raised its 2025 forecast to 13.8M bbl/day.
Front-month Nymex (CL1:COM) for August delivery ended -1.1% to $82.21/bbl this week, including Friday’s 0.5% loss, and September Brent crude (CO1:COM) closed the week -1.7% to $85.03/bbl after falling 0.4% on Friday.
U.S. natural gas futures rose for the first time in four days following expectations that the Freeport LNG export plant will resume operations soon after being interrupted by Hurricane Beryl; front-month August Nymex natural gas was +0.4% for the week to $2.329/MMBtu.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
BP (BP) raised its forecasts for oil and gas demand, as renewable power sources such as wind and solar are not increasing fast enough to keep pace with the growth in global energy demand.
In its 2024 Energy Outlook, BP (BP) warned the world likely is shifting too slowly from fossil fuels to avoid serious climate change, increasing the risks that the eventual transition to clean energy will be “costly and disorderly.”
If the current too-slow trend continues to the early 2040s, the world may have exhausted the so-called “carbon budget” that would limit temperature increases to 2C above pre-industrial levels, according to the report.
The energy sector, represented by the Energy Select Sector SPDR ETF (XLE), ended the week +0.4%.
Top 10 gainers in energy and natural resources in the past 5 days: Pineapple Energy (PEGY) +77%, Solaris Oilfield Infrastructure (SOI) +44.7%, Flux Power Holdings (FLUX) +42.6%, Hawaiian Electric (HE) +29.1%, TPI Composites (TPIC) +27.6%, Solid Power (SLDP) +27.2%, Nuscale Power (SMR) +25.5%, Vivopower (VVPR) +25%, Gatos Silver (GATO) +23.1%, Ameresco (AMRC) +22%.
Top 5 decliners in energy and natural resources in the past 5 days: ZIM Integrated Shipping (ZIM) -22.9%, Nano Nuclear Energy (NNE) -11.9%, Dorian LPG (LPG) -8.7%, Ardmore Shipping (ASC) -8.7%, Stealthgas (GASS) -8.4%.
Source: Barchart.com