With substantial headline risk looming this weekend, oil futures eked out a small gain on Friday as NYMEX-traded crude for July delivery added 4 cents to close $83.95 per barrel. In London, Brent for August delivery rose 26 cents to close at $97.43 per barrel. Oil’s gains despite the fact that economic data points released were again troubling.
In economic news, University of Michigan-Thomson Reuters consumer-sentiment index slid to an initial June reading of 74.1from 79.3 in May. The initial June reading was the lowest since December and well below the 77.8 economists were expecting. The New York Federal Reserves Empire Manufacturing Index fell to 2.3 this month, a 15-point drop from May and well below the reading of 13 economists expected.
On the other hand, it is weakness in the U.S. economy that is stoking speculation that the Federal Reserve might engage in more quantitative easing. Ahead of Sunday’s Greek elections, rumors have been swirling that global central banks are ready to act should the worst-case scenario play out. That is to say it appears as if traders want the anti-austerity party and Greece to depart the Eurozone just saw the markets get more QE.
Regarding oil, that may only lead to a near-term pop. The European Union accounts for about 17% of global oil demand, but on its own, Greece accounts for less than 1%. Then there is the issue of OPEC. The cartel is pumping 31.6 million barrels of crude per day, but it has a quota of 30 million barrels. Clearly, the 12 OPEC members need to stick to the quota to support oil prices, but there is no consensus about doing that.
As U.S. equities ran to their second consecutive weekly gain, oil stocks got a lift as well. Even Petrobras (NYSE: PBR), Brazil’s state-run oil company, closed higher, but it should be noted that the stock touched a new 52-week low earlier in today’s session.
On Thursday, Bloomberg published a piece entitled "Brazil’s Petrobras Worst Big Oil Bet on Deepwater Delays," which noted the stock "is the worst investment among the world’s biggest oil companies this year as Brazil’s state-controlled producer suffers delays and cost overruns developing the largest oil finds in more than a decade."
Exxon Mobil (NYSE: XOM) added more than 1% on the day while Chevron (NYSE: CVX) jumped 2.4%. On no specific headlines, shares of Chesapeake Energy (NYSE: CHK), the second-largest U.S. natural gas producer, surged 4.4%, coming to a dead stop at resistance at $18.10. That embattled stock has gained almost 29% in the past month.