Oil futures declined on Friday, on track to end a streak of nine consecutive weekly gains — the longest on record — as rising U.S. crude inventories, the potential for revived Iran nuclear talks, and a retreat by natural-gas futures dragged crude prices off multiyear highs.
“The oil market has experienced an imperfect storm,” Michael Lynch, president of Strategic Energy & Economic Research, told MarketWatch.
The Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, “reduced inventories to relatively low levels at a time when economic growth and oil demand were robust,” he said. That, combined with the loss of oil production and refinery output in the U.S. due to Hurricane Ida, which reached the U.S. Gulf Coast in late August, tightened markets, he said.
However, “it seems likely that even without renewed outbreaks of COVID, supply will outpace demand early in the New Year,” said Lynch.
For now, traders awaited the latest decision on oil production by OPEC+ at its meeting on Thursday. At its meeting in early October, the group decided to keep its current plan in place to gradually raise output each month by 400,000 barrels a day.
“I don’t think OPEC+ will change their plans at the next meeting, which will be bullish in the short term,” Lynch said.
In Friday dealings, West Texas Intermediate crude for December delivery
fell by 92 cents, or 1.1%, to $81.89 a barrel on the New York Mercantile Exchange. The U.S. benchmark was on track for a 2.3% weekly fall. That would end a nine-week streak of gains, the longest ever for front-month contracts, based on records data back to April 1983, according to Dow Jones Market Data.
For the month, WTI crude was still up over 9% after settling earlier this week at a more than seven-year high.
December Brent crude
the global benchmark, was down 23 cents, or 0.3%, at $84.09 a barrel on ICE Futures Europe. The front-month contract, which expires at the end of the session, was down 1.7% for the week, but up over 7% for the month. January Brent
the most actively traded contract, declined by 59 cents, or 0.7%, to $83.07 a barrel.
“The sharp rise in U.S. crude oil stocks and the expectation of nuclear talks being resumed with Iran have temporarily eased concerns about supply to some extent, leading to profit-taking,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note. “This does nothing to change the tight market situation, however.”
The Energy Information Administration on Wednesday reported that U.S. crude inventories rose a larger-than-expected 4.3 million barrels last week. Also Wednesday, Iran on Wednesday indicated that it plans to resume talks on the Joint Comprehensive Plan of Action, known as the Iran nuclear deal, which could pave the way for the removal of U.S. sanctions that were reimposed by the Trump administration after it pulled Washington out of the agreement in 2018.
Futures for the petroleum products saw mixed trading, ahead of the expiration of the November contracts at the end of the session. November gasoline
added 0.2% to $2.439 a gallon, down 1.7% for the week, but up over 11% for the month. November heating oil
was down 1.5% at $2.48 a gallon, trading over 2% lower for the week, but on pace for monthly climb of 6%.
While crude was taking a breather from its recent run, analysts underlined tight market conditions. Despite the rise in overall U.S. crude inventories last week, supplies in Cushing, Oklahoma, the delivery hub for Nymex futures, continued to fall and were on pace to empty tanks by the end of the year, analysts said.
Meanwhile, the discount for WTI crude to Brent has narrowed sharply, further underlining tight U.S. market conditions.
The OPEC+ Joint Technical Committee met on Thursday, ahead of the OPEC+ ministers meeting. One delegate told S&P Global Platts that the technical meeting went smoothly, and that “no major changes in [the] demand and supply picture” came up.
Bloomberg reported that the committee delegates said the global oil-supply deficit will be 300,000 barrels a day on average in the fourth quarter — smaller than the 1.1 million barrel daily shortfall shown in figures initially presented to the panel.
In other Nymex trading, natural-gas futures remain on track for a weekly rise, even after falling by nearly 7% on Thursday after Russian President Vladimir Putin told Gazprom to ship more natural-gas westward to European customers.
December natural gas
lost 4.3% to $5.532 per million British thermal units, with front-month contract prices up over 1% for the week, but down over 7% for the month.