Crude oil rises to 7-month high

Crude oil advanced to a seven-month high in London on signs the global glut is contracting more quickly than projected.

Brent oil rose as much as 2.4 per cent to $50.83 a barrel, the highest intra-day level since November 4, amid signs the market is rebalancing. Eni SpA said 65,000 barrels a day of crude output was halted Friday after an militant attack in Nigeria. Investors are purchasing commodities on speculation the Federal Reserve will hold off from raising interest rates this month, which will weaken the dollar and bolster interest in raw materials priced in the currency.

"We're still dealing with follow through from the jobs report Friday," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "The dollar isn't doing much today but we still don't think it's reached its bottom. Eni's problems in Nigeria are adding to the upward pressure."

Oil has surged more than 80 per cent from a 12-year low early this year on a combination of unexpected supply disruptions and a persistent decline in US output, which is under pressure from the Organization of Petroleum Exporting Countries' policy of producing without limits. Opec balked at adopting a new output ceiling last week. Outgoing Secretary-General Abdalla El-Badri said that it's difficult to find a target as Iranian supply rises and significant Libyan volumes are halted.

Market recovery
Brent for August settlement increased 91 cents, or 1.8 per cent, to $50.55 a barrel on the London-based ICE Futures Europe exchange, at 11:49 am in New York. The global benchmark crude was at a 35-cent premium to West Texas Intermediate oil for August delivery.

WTI for July delivery climbed $1.09, or 2.2 per cent, to $49.71 a barrel on the New York Mercantile Exchange. Total volume traded was 30 per cent below the 100-day average.

Commodities rose and the dollar sank Friday after data showed that the US economy created the fewest jobs last month in almost six years. The Bloomberg Dollar Index, which tracks the currency against major peers, was little changed after tumbling 1.5 per cent on June 3, the most in four months. The Bloomberg Commodity Index, a gauge of 22 raw materials, increased as much as 1.5 per cent to the highest level since October 23.

Niger delta
A militant group known as Niger Delta Avengers has claimed attacks on facilities belonging to companies including Chevron Corp., Royal Dutch Shell Plc and Agip Oil Co., causing Nigeria's output to drop to an almost 30-year low of about 1.4 million barrels per day.

"Opec didn't do anything last week because they are basically happy with how prices have recovered," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "We have additional headlines from Nigeria. A lot of high-quality crude has been lost and there's no sign it will come back anytime soon."

The global surplus is down to 1.2 million to 1.5 million barrels a day and has dwindled faster than expected, Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development, said in a Bloomberg Television interview. The market recovery is on track and a price range of $55 to $60 is possible this year, Mansoori said. Abu Dhabi controls most of the oil reserves in the United Arab Emirates, OPEC's fourth-largest producer.

Gasoline Market
Gasoline futures dropped amid speculation that demand for the fuel won't meet expectations, according to Yawger. The gasoline crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, was down as much as 8.1 per cent to the lowest intraday level since May 10.

"The gasoline market is the most interesting one today," Yawger said. "Demand hasn't materialised. The crack spread is shrinking while contango is expanding."

July gasoline futures fell 0.5 per cent to $1.60 a gallon. The market is in contango, when prices for delivery today are lower than those in future months, which may signal weak near-term demand or rising supply.

Oil-market news:
Speculators cut their total long and short positions on WTI crude to the lowest since January 2015 before the June 2 Opec meeting, according to Commodity Futures Trading Commission.

Saudi Arabia raised pricing on most oil grades for sale to Asia and the US in July after the nation's energy minister said demand was robust.

US drilling increased from the lowest level in more than six years, according to data from Baker Hughes Inc. on Friday.