Instead, small and even temporary changes to the oil market were enough to keep the rally going, traders said. Pipeline outages and strikes disrupted supply around the world, China reported rising imports, employment rose in the U.S. and the storage glut there didn’t grow. With fears of a U.S. recession now firmly on the back burner, these changes are enough to avoid another huge oil selloff for now, said Quincy Krosby, market strategist at Prudential Financial, which manages $1.2 trillion.
“All the market needs to see is that at the margin something is changing,” she said. “There’s stability globally, and that helps oil.”
Light, sweet crude for June delivery settled up 55 cents, or 1.3%, at $43.73 a barrel on the New York Mercantile Exchange. It was the highest settlement since Nov. 10, after a weekly gain of $2.02, or 4.8%.
Brent, the global benchmark, rose 58 cents, or 1.3%, to $45.11 a barrel on ICE Futures Europe. It ended the week up $2.01, or 4.7%, its seventh winning week in the past nine.
The gains come amid a broader change of heart from investors about commodities. Silver and copper also rode winning streaks during the week, gold is coming off its best quarter in 30 years and industrial metals such as steel, aluminum and zinc have posted a string of recent gains. Even the most downtrodden commodities like iron ore and coal bounced after an announcement of new tax overhauls in China lifted hopes for its economic growth, said Bart Melek, head of commodity strategy at TD Securities in Toronto.
After investors repeatedly sought redemptions in early 2015, they have now put more money into commodity hedge funds than they have taken out for seven consecutive months, the longest stretch since eVestment began tracking flow data in November 2008. Those funds added $4.1 billion in the first quarter, their best quarter in nearly seven years, eVestment said Friday.
“The sentiment in commodity markets has clearly shifted toward being more bullish,” said Jeffrey Currie of Goldman Sachs in a note to clients.
Investors have been moving quickly to get ahead of trades, pumping money into oil and other oversupplied commodity markets months before many expect their glut may start to wane, Mr. Melek and others said.
Goldman said the shift isn’t sustainable and warned that oil, in particular, may fall again before its supply and demand are likely to rebalance sometime this fall.
“We are so fraught with speculative cash right now across the sector that we’re probably going to be seeing outsized reaction or volatility on even moderate news,” said Mr. Melek of TD Securities.
Production disruptions in Kuwait, Nigeria and Venezuela had added to bullish sentiment in oil, pulling it up from the start of the week almost immediately after the weekend’s failed negotiations on an output cap between Saudi Arabia, Russia and others.
U.S. output has continued to slowly decline, falling to below 9 million barrels a day in the prior week, according to Energy Information Administration data released Wednesday. It showed a strong draw on distillate stocks, which include heating oil and diesel, balancing out an addition to crude stockpiles last week, taking total U.S. stocks lower for only the sixth time in 24 weeks since the start of November.
But investors shouldn’t become complacent because of steady gains and improving sentiment, analysts and traders said. Others beyond Goldman warned that prices could retreat sharply again in the weeks to come, noting how temporary the recent supply disruptions can be. Kuwait, for instance, where production nearly halved earlier in the week due to an oil workers’ strike, already has output back to its normal level.
“This is not a place where you want to take a directional oil bet,” said James Koutoulas, chief executive at the futures-trading firm Typhon Capital Management, which manages about $100 million in assets. “You want to [bet on] volatility.”
In refined-product markets, gasoline futures settled up 1% Friday at $1.5309 a gallon, with gains of 4.8% on the week, its best week since early March. Diesel futures settled up 0.7% at $1.3089 a gallon, up 6.2% for the week.
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