Demand Concerns Forgotten as Crude Achieves Five Month Closing High

Meanwhile, several developments could see further gains for the commodity: File Image/Pixabay

Once more, the waning of concerns about global economic woes and corresponding weakening demand for crude supported oil prices on Friday, with West Texas Intermediate settling 98 cents higher at $63.11 per barrel on Friday - a 1.6 percent rise to a new five-month closing high.

Brent on Friday fared equally well, climbing 94 cents to $70.34 per barrel - a new five month closing high.

This time, the main impetus for the gains was the U.S. Bureau of Labor Statistics reporting 196,000 jobs added in March, marking a return to solid employment growth after weak performance in February.

Ongoing military action in Libya also supported prices, and Commerzbank said in a note that any production outages in that country would "noticeably increase the pressure on Saudi Arabia to open up the oil tap again, as it did in the autumn."

Yet another contributing factor to crude's performance on Friday was news of a potential production slowdown out of Venezuela: state-owned PDVSA expects its crucial crude upgraders to operate well below capacity this month, according to industry sources.

Moving forward, a host of developing factors will likely motivate traders in the near term, including U.S. president Donald Trump stating that his country and China are "very close to making a deal" to settle their trade dispute: if so, the resulting lifting of $250 billion worth of tariffs would presumably be a huge boon to prices.

However, something that could send prices spiraling downward is if Saudi Arabia begins selling its crude in currencies other than the U.S. dollar, which it is rumoured to be considering if American lawmakers pass its anti-OPEC (the Organization of the Petroleum Exporting Countries) bill: although considered an unlikely scenario because the passing of the bill is viewed as a long shot, this would erode U.S. influence over global financial markets and Washington's ability to enforce sanctions on foreign entities.

Robbie Diamond, president and CEO of the think tank Securing America's Future Energy, said, "This report, if true, would only further prove that Saudi Arabia is willing to go to extreme lengths to protect its unfair advantage in the global oil market."

The near future could also see a Trump-inspired bid to lower prices for the benefit of American motorists, this time in the form of an executive order that could be rolled out next week that aims to cut regulations, spur interstate pipeline construction, and thus lower energy costs.

However, Bloomberg on Friday saw fit to point out that crude benchmark trading isn't exactly following a logical pattern: that's because  U.S. sanctions on Venezuelan and Iranian oil as well as OPEC's output cuts are creating a shortage of heavy to medium sour crude, while the American shale boom is generating ample shipments of cleaner and lighter sweet supply in the market.

The news agency stated, "So it stands to reason that prices of scarce sour crude - reflected in the Dubai oil benchmark - should gain versus the Brent marker, which represents sweet supplies; yet the opposite is occurring: a gauge of strength between the two shows the Middle East oil is at its weakest level since December."

The implied message is that when it comes to crude trading, anything could happen in the foreseeable future.