New York —
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Crude futures settled higher Friday, as a higher oil demand growth forecast from the International Energy Agency trumped a downturn in equities on global trade disputes.
October ICE Brent settled 74 cents higher at $72.81/b, while September NYMEX crude settled 82 cents higher at $67.63/b.
In refined products, September NYMEX ULSD settled 2.78 cents higher at $2.1397/gal, while September NYMEX RBOB settled 3.93 cents higher at $2.0392/gal.
The IEA raised its estimate of global oil demand growth for 2019 to 1.5 million b/d from 1.4 million b/d, with China and India leading the way.
While the IEA raised is non-OPEC supply growth for 2019 by 100,000 b/d to 1.9 million b/d, it boosted its “call” on OPEC crude by 500,000 b/d.
Following two days of lower crude prices on US product stock builds and news of OPEC production increases, Friday’s IEA data was “a wake-up call,” said Price Futures Group analyst Phil Flynn.
“The concerns that the market had earlier in the year haven’t gone away just because OPEC raised production,” Flynn said.
US sanctions on Iran are due to kick in November 4, which could remove up to 1 million b/d from the market while global demand is growing.
The IEA forecasts implied “that if we lose the Iranian oil it will be difficult if not impossible to replace,” Flynn said.
Also supportive Friday was news that the UK’s Unite trade union would go ahead with a 12-hour strike Monday at Total’s North Sea oil and gas platforms over a labor dispute.
The strikes have so far removed 70,000 b/d from the market. Other 12-hour and 24-hour strikes are being considered in September and October.
The downside for crude is still vulnerable to the impact of trade disputes on global demand. US President Donald Trump Friday ordered a doubling of steel and aluminum tariffs on imports from Turkey, which pulled equity markets lower.
The news came two days after the US and China imposed additional tariffs on each other.
“A spanner has been thrown in the works and US exporters are losing their foothold in China,” amid the trade dispute between Washington and Beijing, Tamas Varga, an analyst at PVM, said in a morning note.
PERMIAN RIG COUNT CLIMBS
Crude futures were unfazed by an increase in US rig counts Friday.
The Permian Basin led a rise in rig counts this week, climbing by five to 485 rigs, Baker Hughes data showed.
Total US rigs climbed by 13 to 1,057.
The Permian rig count hand been lingering between 470 and 480 since end-May, as producers have slowed drilling activity because of tight takeaway capacity.
Current Permian oil production at 3.5 million b/d exceeds combined local refinery demand and pipeline takeaway capacity of roughly 3.4 million b/d, according to S&P Global Platts Analytics.
Still, some Permian producers have been assuring investors in second quarter earnings calls this month that they are securing transport capacity to get barrels out of the region.
Pioneer, for instance, said more than 90% of its Permian production is covered under firm transportation contracts through 2021, as it transitions to become a pure-plan Permian player.
Likewise, Concho Resources, which has the single largest rig program in the Permian, has also locked in 90% of its production in pipeline contracts.
Other Permian producers have shifted resources outside of the basin.
–Jeff Mower, firstname.lastname@example.org
–Edited by Richard Rubin, email@example.com