HOUSTON, Sept. 23 (Xinhua) -- Oil prices recorded a weekly gain at the end of Friday. The prices for both benchmarks increased due to decline in the U.S. crude inventories and some reports signaling huge declines in the Iranian crude oil exports.
The price of West Texas Intermediate (WTI) and Brent for November delivery increased by 2.6 and 0.9 percent, respectively, during the week ending Sept. 21. And WTI and Brent settled at 70.78 and 78.80 U.S. dollars, respectively, on Friday.
On Tuesday, WTI and Brent prices rallied due to reports indicating huge declines in the Iranian crude oil exports. The sanctions targeting Iran by the United States will take effect on Nov. 4, but it has caused supply concerns.
Matthew Smith, director of commodity research at ClipperData in Houston, U.S. state of Texas, told Xinhua that "there is a major drop in Iranian exports which should be reflected in lower output from the Persian state."
On Tuesday, WTI increased by 1.47 percent and settled at 69.59 dollars a barrel, while Brent crude increased by 1.46 percent and settled at 79.03 dollars a barrel.
On Wednesday, the major benchmarks continued their upward movement as EIA reported significant draws in both crude oil and gasoline inventories during the week ending Sept. 14, which supported the bullish sentiment that was driven by the supply concerns due to lower Iranian oil exports.
EIA reported a draw of 2.06 million barrels in commercial crude oil inventories, close to the market's expectation of a draw of 2.7 million barrels.
U.S. import of crude oil increased by 433,000 barrels from the previous week's levels to 8.02 million barrels per day. Crude oil exports also increased by 539,000 barrels per day from the previous week's levels to 2.37 million barrels per day.
According to EIA, the weekly estimate of U.S. oil production remained unchanged at 11 million barrels per day.
Meanwhile, EIA reported a build of 839,000 barrels in distillates inventory, much smaller than the market' s expectation of build of 1.8 million barrels. It also reported a draw of 1.76 million barrels in total gasoline inventories, much larger than the market's expectation of draw of 100,000 barrels.
During the week ending Sept. 14, the crude oil input to refineries in the United States decreased by 442,000 barrels per day to 17.42 million barrels per day. The decline is seasonal as some major refineries start their maintenance projects after the high demand season.
Normally, the crude oil inventories start building up during the maintenance season as the utilization rate of the refineries decline and the inventories of the oil products come down due to the temporary decline in the supply of the oil products.
Analysts attributed the decline in the crude oil inventories to the increase in the crude oil exports. Analysts consider the sustainability of the U.S. crude oil exports as a crucial factor for the oil prices.
After the EIA's weekly petroleum status report, WTI and Brent contracts prices moved upward and settled 2.02 percent and 0.68 percent higher, respectively, on Wednesday.
On Thursday, the prices for both major oil benchmarks took a dive as the U.S. President Donald Trump tweeted about the high oil prices, in which he urged "the OPEC monopoly must get prices down now!"
According to analysts, the nature of the policy decisions in the United States, the OPEC and Russia are quite different from each other.
Anna Mikulska, a non-resident fellow at the Center for Energy Studies, Rice University's Baker Institute for Public Policy based in Houston, told Xinhua that "U.S. production depends on decision of multitude of oil companies and responds to market conditions rather than government direction. This distinguished U.S. oil production from that of Russia and Saudi Arabia, where state-owned companies serve state goals and where production levels are decided on the basis of policy rather than strict market profitability."
She said, "In addition to being also guided by motivations other than profits, policy response is never as fast as market response. Now the Trump Administration is urging Saudi Arabia and Russia to keep oil output high as the U.S. is set to renew sanctions on Iran."
However, some analysts believe the looming sanctions against Iran would lead to higher prices of crude oil in the future.
Anas Alhajji, an energy economist based in Dallas, Texas, told Xinhua that "Trump Tweet asking OPEC for more oil before the November elections misses an important point: Lower prices now means higher and uncontrollable prices before the 2020 elections."
He explained that "lower prices now mean lower investment in E&P (Exploration & Production) and consequently lower supply later."
On Thursday, WTI and Brent contracts prices settled 0.93 percent and 0.79 percent lower, respectively.
On Friday, Baker Hughes reported that the number of active drilling oil and gas rigs in the United States decreased by 2 to 1053. The oil rigs in the country declined by 1 to 866.
The pipeline bottlenecks are causing big price differential between Midland and WTI. Analysts see those pipeline bottlenecks as a big threat against production growth of the Permian Basin, locate in the region of western Texas and southeastern New Mexico.
Baker Hughes also reported the number of active drilling oil and gas rigs in Canada decreased by 29, but still 13 higher than the same period last year. Oil rigs declined by 13 and gas rigs declined by 16 in the country,
Analysts attributed the major decline in the Canadian gas rig count to the very low gas prices on the Canadian natural gas spot market. The natural gas producers preferred curtailing their production rather than increasing in the current depressed market.
Moreover, U.S. Dollar Index maintained around 94 during the week, down from its peak level of 97 last month. U.S. Dollar Index is a measure of the value of the U.S. dollar relative to a basket of foreign currencies. Oil is mostly traded in dollars all over the world and a stronger dollar pressures the oil demand.
On Friday, WTI and Brent contracts prices settled 0.83 percent and 0.13 percent higher, respectively.
The price differential between WTI and Brent contracts narrowed down this week. The differential was 8.02 dollars at the end of the week.
As the U.S. oil exports increase, the differentials between the two major benchmarks come down. The higher differentials give more arbitrage opportunities for traders to pursue. As a result, more U.S. crude oil would be shipped to Asian market.
The oil market has been concerned with the ongoing trade dispute as it might slow down the economic growth across the world, especially in the case of China. The oil demand growth in China has been the main driver for the increasing world oil demand.
However, the market is right now focusing on the OPEC meeting on Sunday in Algiers, the capital city of Algeria.
