Crude oil futures - weekly outlook: March 2 - 6

Investing.com - Crude oil futures rallied sharply on Friday, to record the first monthly gain in seven months, amid speculation productions cuts by drillers in the U.S and global oil companies will alleviate a glut in supplies.

On the New York Mercantile Exchange, crude oil for delivery in April jumped $1.59, or 3.3%, on Friday to end the week at $49.76 a barrel.

The sharp increase continued the trend of volatile price fluctuations, as prices have wavered dramatically over the last several weeks. Daily oil prices have moved more than 2% in an up or down direction in 25 of the last 38 trading days.

On Thursday, Nymex oil plunged $2.82, or 5.53%, to close at $48.17.

For the week, New York-traded oil futures slumped $1.29, or 2.71%, the second consecutive weekly loss. However, prices ended February with a gain of $1.68, or 0.91%, halting seven straight months of declines.

Industry research group Baker Hughes (NYSE:BHI) said Friday that the number of rigs drilling for oil in the U.S. fell by another 33 last week to 986, the lowest since June 2011.

The number of oil rigs has declined in 17 of the last 20 weeks since hitting an all-time high of 1,609 in mid-October.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

However, total U.S. crude oil inventories stood at 434.1 million barrels as of last week, the most in at least 80 years, indicating that cheap prices have yet to affect output.

Elsewhere, on the ICE Futures Exchange in London, Brent for April delivery surged $2.53, or 4.21%, on Friday to settle the week at $60.05 a barrel by close of trade.

The April Brent contract rose $2.21, or 3.3%, on the week, as worries over disruptions to exports and production in Libya and Iraq buoyed prices.

For February, London-traded Brent prices soared $9.54, or 15.31%, the first monthly gain since June and the biggest monthly increase in nearly six years.

Saudi Arabian oil minister Ali al-Naimi said earlier in the week that oil markets have settled down after a prolonged period of volatility late last year.

Oil prices have fallen sharply in recent months as the Organization of Petroleum Exporting Countries resisted calls to cut output, while the U.S. pumped at the fastest pace in more than three decades, creating a glut in global supplies.

The spread between the Brent and the WTI crude contracts stood at $10.29 a barrel by close of trade on Friday, compared to $9.41 in the preceding week.

In the week ahead, investors will be turning their attention to Friday’s U.S. nonfarm payrolls report for further indications on the strength of the recovery in the labor market.

Data on Friday showed that the U.S. economy grew 2.2% in the fourth quarter, down from an initial estimate of 2.6%. In the third quarter, the economy expanded at rate of 5%.

Meanwhile, in China, official data released over the weekend showed that activity in the country's factory sector contracted for a second straight month in February.

China's manufacturing purchasing managers' index released Sunday rose to 49.9 in February, just above expectations for a reading of 49.7 and up slightly from a two-year low of 49.8 in January.

On Saturday, the People's Bank of China cut its benchmark interest rate by a quarter percentage point to 5.35%.

It was the second rate cut in less than four months, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.

China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.

Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.

Monday, March 2

China is to publish the revised reading of the HSBC manufacturing index.

The euro zone is to produce preliminary data on consumer prices and a report on unemployment.

In the U.S., the Institute of Supply Management is to report on manufacturing activity.

Tuesday, March 3

The Reserve Bank of Australia is to announce its benchmark interest rate and publish its rate statement.

Wednesday, March 4

China is to publish the HSBC services index.

The Bank of Canada is to announce its benchmark interest rate and publish its rate statement.

The U.S. is to release the ADP non-farm payrolls report, which looks at private sector jobs growth. Later in the day, the ISM is to report on services sector activity. The country is also scheduled to produce weekly oil supply data.

Thursday, March 5

The Bank of England is to announce its official bank rate.

The European Central Bank is also to announce its monetary policy decision. The rate announcement will be followed by a post-policy meeting press conference with President Mario Draghi.

The U.S. is to release the weekly report on initial jobless claims and data on factory orders.

Friday, March 6

The U.S. is to round up the week with the closely watched government report on nonfarm payrolls, the unemployment rate and average earnings.