Oil Caps Biggest Weekly Gain in a Month; Discount Narrows

West Texas Intermediate crude capped its biggest weekly gain in a month on speculation stronger U.S. economic growth will increase demand. WTI narrowed its discount to Brent to a one-year low.

The U.S. economy expanded in the second quarter at the fastest rate since the last three months of 2011, the Commerce Department said. Brent dropped for a third week in four as ample supplies shield the oil market from the U.S. military campaign against Islamic State. Gasoline tumbled after reaching this month’s high yesterday.

“Improving U.S. economic conditions should improve the fundamental outlook here,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is trying to stabilize. We still have a lot of supply out there and that’s weighing on the overall market.”

WTI for November delivery rose $1.01, or 1.1 percent, to settle at $93.54 a barrel on the New York Mercantile Exchange. Prices climbed 1.2 percent this week. The volume of all futures was 1 percent above the 100-day average.

Brent for November settlement ended unchanged at $97 on the ICE Futures Europe exchange. The volume of all futures traded was about 31 percent below the 100-day average. Prices slid 1.4 percent this week. WTI’s discount to Brent shrank to $3.46, the smallest since September 2013.

Reformulated gasoline futures, or RBOB, dropped for the first time in four days, falling 2.1 percent to 2.6619 a gallon on the Nymex. Prices reached $2.718 yesterday, the highest settlement this month, on concern refinery outages will reduce production.

GDP Data

“The shorts bought a lot of contracts yesterday and now they are covered,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The market is readjusting back to where it should be. That’s why we are seeing RBOB is back down again.”

U.S. gross domestic product grew at a revised 4.6 percent annualized rate in the second quarter, up from a previous estimate of 4.2 percent, the Commerce Department said. The increase matched the median forecast of 81 economists surveyed by Bloomberg and followed a 2.1 percent decline in the first three months of the year.

Refineries processed 16.6 million barrels a day of crude and other liquids in the week ended Sept. 19, a seasonal high and up 0.4 percent from the previous week, the Energy Information Administration said on Sept. 24. Imports of crude oil fell 1.24 million barrels a day to 6.87 million, the lowest level since May, as U.S. domestic production increased.

Global Supplies

“We are pushing out a lot of imports,” said Larry. “That’s increasing global supplies.”

Brent narrowed its premium to WTI amid rising global supplies. Higher exports from Libya and booming U.S. production “deepened the overhang in crude markets and overshadowed any lingering worries of potential output disruptions in Iraq,” the International Energy Agency said in a monthly report on Sept. 11.

Libya’s oil output rose to 925,000 barrels a day from 900,000, National Oil Corp. spokesman Mohamed Elharari said yesterday. Libya is working to restore crude output after a year of unrest reduced it to the smallest producer in the Organization of Petroleum Exporting Countries.

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