adminOil futures declined on Friday, on track for a second straight weekly fall after fears of a widening of the Israel-Hamas war faded and investors renewed their focus on the outlook for demand.
Price action
-
West Texas Intermediate crude for December delivery
CL00,
-2.61% CL.1,
-2.61% CLZ23,
-2.61%
fell 83 cents, or 1%, to $81.63 a barrel on the New York Mercantile Exchange, with prices for the contract down 4.6% for the week, FactSet data show. -
January Brent crude
BRN00,
-2.44% BRNF24,
-2.44% ,
the global benchmark, was down 20 cents, or 0.2%, at $86.65 a barrel on ICE Futures Europe, eyeing a weekly loss of 2.9%. -
December gasoline
RBZ23,
-2.00%
declined by 1.9% to $2.2042 a gallon, while December heating oil
HOZ23,
-3.40%
lost 1.9% to $2.9677 a gallon. -
Natural gas for December delivery
NGZ23,
+0.95%
traded at $3.505 per million British thermal units, up 0.9%.
Market drivers
“The weekend is upon us, and some traders have little issues booking profit from shorts into top side cover, given the Middle East weekend headline risk,” said Stephen Innes, managing partner at SPI Asset Management.
The “call skew is down,” making oil cheaper but also suggesting the market now thinks the “odds of a broader dust-up are lessening,” he said in a note late Thursday. “However, even if there is only a minuscule chance of the whole Middle East powder keg explosion, the minuscule [chance] is too big when religion is stoking the narrative.”
“‘Even if there is only a minuscule chance of the whole Middle East powder keg explosion, the minuscule [chance] is too big when religion is stoking the narrative.’”
Analysts continue to monitor the Israel-Hamas war for signs of a potential spillover that could involve Iran. Crude had rallied following the start of the war on fears that a wider conflict could see the U.S. more heavily enforce sanctions on Iranian crude exports, while a worst-case scenario could see Iran or its proxies threaten key transportation chokepoints and infrastructure in the region.
So far, there’s no sign of disruptions to production in the Middle East, but the oil market “remains undersupplied, and in our opinion it is still too early to completely price out any geopolitical risks,” Barbara Lambrecht, commodity analyst at Commerzbank, said in a Friday note.
“We therefore see the oil price as well supported,” she said.
An updated forecast due next week from the U.S. Energy Information Administration probably won’t change the picture, even though U.S. production could be upwardly corrected again in the short term, the analyst said.
The EIA is scheduled to release its monthly Short-term Energy Outlook report on Tuesday. However, the weekly petroleum-supply report and data on natural-gas supplies will be delayed, with separate reports covering two weeks of data released on Nov. 15 and Nov. 16, respectively, due to a planned systems upgrade.
Oil prices had fallen sharply this week, until the Federal reserve announced another rate-hike pause on Wednesday, leading the market to believe that the rate-hike cycle is coming to an end, said StoneX’s Kansas City energy team, led by Alex Hodes, in a Friday note.
“One major factor the Fed has been watching is the job growth data, which the Fed would like to see ease, which would indicate the economy is slowing down,” they said.
Data released early Friday showed job growth slowed more than expected in October. The unemployment rate rose to 3.9% from 3.8% in September. That has fed worries about the potential for a slowdown in economic growth as well as in energy demand.
The jobs data, however, also gave the Federal Reserve “what they want to see” and raised the chances that the rate-hike cycle is done, the StoneX energy team wrote.
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