Oil futures ended lower on Friday, but posted gains for the month as well as the quarter, with some analysts and traders expecting prices to resume their rise toward the $100-a-barrel threshold as the supply outlook continues to tighten.
Price action
-
West Texas Intermediate crude
CL00,
-0.02%
for November delivery
CL.1,
-0.02% CLX23,
-0.02%
fell 92 cents, or 1%, to settle at $90.79 a barrel on the New York Mercantile Exchange. Prices based on the front-month contract marked a weekly gain of 0.8%, monthly advance of 8.6%, and ended 28.5% higher for the quarter, according to Dow Jones Market Data. -
November Brent crude
BRNX23,
the global benchmark, fell 7 cents, or nearly 0.1%, at $95.31 a barrel on ICE Futures Europe. The contract, which expired at the end of the session, was up 2.2% for the week, 9.7% higher for the month and gained 27.3% for the quarter. The new front month December contract
BRN00,
-0.10% BRNZ23,
-0.10%
shed 90 cents, or 1%, to $92.20 a barrel on Friday. -
Back on Nymex, October gasoline
RBV23,
-0.16%
fell 2.6% to $2.44 a gallon, and lost nearly 12% for the month, while October heating oil
HOV23
added 1.3% to $3.36 a gallon, up 7% for the month. -
November natural gas
NGX23,
+0.03%
fell 0.5% to $2.93 per million British thermal units. It was up 1.7% for the week, climbed 5.8% for the month and added 4.7% for the quarter.
Market drivers
“Oil was solidly on its path to $100, but the trio of inflation, rates and the [Federal Reserve] have come back from the dead and shaken up the confidence,” Manish Raj, managing director at Velandera Energy Partners, told MarketWatch.
If interest rates do hold higher for longer, then oil is “certainly” headed back to the $80s, he said. “For now, the only certainty in the market is volatility.”
Read: Why gasoline prices are set to fall even as oil marches toward $100 a barrel
The soft U.S. GDP report released Thursday “offered a reason for traders to book some profits as well after oil futures rallied into some key technical resistance with WTI topping $95 [a] barrel in intraday trade this week,” analysts at Sevens Report Research wrote in Friday’s newsletter.
Still, the primary trend for oil is “decidedly higher with global oil benchmarks hitting fresh 52-week highs this week, but a continued pullback towards key support between $89 and $90 is not unlikely near term,” the Sevens Report analysts said.
WTI crude had traded above $95 a barrel on Thursday, intraday, before turning south, notching its highest intraday level since August of last year, while Brent hit its highest since November.
Crude has rallied over the past four months, with tightening supplies taking center stage. Analysts have cited Saudi Arabia’s June decision to implement a production cut of 1 million barrels a day beginning in July — a reduction that was recently extended through the end of the year — as the main catalyst for the rally.
See: 4 reasons oil prices are surging toward $100 a barrel
“The supply of oil is restricted due to the production cuts in Saudi Arabia and because Russia has reduced oil exports and banned exports of certain oil products. At the same time, demand for oil is continuing to grow. This is tightening the oil market, as evidenced by declining inventories,” Carsten Fritsch, commodity analyst at Commerzbank, said in a Friday note.
Tightening supplies at Cushing, Oklahoma, the delivery hub for Nymex WTI futures, are a particular concern, falling toward 20 million barrels last week, according to Energy Information Administration data.
“Any additional decline would threaten to bring them down to a critical level, which could make further withdrawals difficult,” Fritsch wrote, while also noting that crude stocks in the Midwest rose last week, which suggests supplies in the region are less tight than the Cushing figures imply.
Looking ahead, the Joint Ministerial Monitoring Committee meeting of the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, is scheduled for Wednesday.
Saudi and Russian commitments have signaled the market not to expect changes through year-end, “so the Oct. 4 meeting is expected to be benign, said Velandera Energy’s Raj.
“Everything at OPEC is going according to plan, so they are in the ‘if it ain’t broke, don’t fix it”’ camp. We expect policy stability through December,” he said.
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