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Oil futures declined on Friday, with U.S. benchmark prices marking their lowest settlement in more than two weeks.
Another Federal Reserve official poured cold water on prospects for near-term interest-rate cuts, raising concerns about the economy and oil demand, while a rise in the number of active U.S. oil rigs fueled expectations for higher domestic production.
Price action
-
West Texas Intermediate crude for April delivery
CL00,
-2.60% CLJ24,
-2.60%
fell $2.12, or 2.7%, to settle at $76.49 a barrel on the New York Mercantile Exchange. Front-month contract prices saw a 2.5% weekly fall and settled at their lowest level since Feb. 8, according to Dow Jones Market Data. -
April Brent crude
BRN00,
+0.09% BRNJ24,
+0.07% ,
the global benchmark, lost $2.05, or nearly 2.5%, at $81.62 a barrel on ICE Futures Europe. Brent was down 2.2% for the week, ending at its lowest level since Feb. 14. -
March gasoline
RBH24,
-2.50%
shed 2.5% to $2.28 a gallon, ending 2.5% lower for the week, while March heating oil
HOH24,
-2.31%
declined by 2.3% to $2.69 a gallon, losing 4.2% for the week. -
Natural gas for March delivery
NGH24,
-8.26%
settled at $1.60 per million British thermal units, down nearly 7.5% Friday to post a weekly loss of 0.4%.
Market drivers
Fed Gov. Chris Waller late Thursday said there was “no rush” to cut interest rates following stronger-than-expected inflation and economic data since the beginning of the year. Waller and other Fed officials have made a concerted effort in the past few weeks to brush back Wall Street’s previous forecasts for rate cuts as early as March.
Strong data “provides the Fed with greater leeway to sustain its restrictive monetary policy for an extended period. This dynamic constrains economic growth and suggests reduced future oil demand, contributing to the price decline,” said Ricardo Evangelista, senior analyst at ActivTrades, in a note.
“Nonetheless, the downside for the barrel’s price remains limited by supply-side concerns stemming from ongoing geopolitical turbulence in the Middle East,” he said.
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In the U.S., however, a rise in the number of active rigs drilling for oil pointed to the potential for further gains in already record-high domestic production.
Baker Hughes Co.
BKR,
reported Friday that the number of U.S. oil rigs climbed by six this week to 503, following a decline of two oil rigs the week before.
Overall this week, analysts have been “chasing price action rather than forecasting it,” because of “fluctuating price action without clear direction,” Stephen Innes, managing partner at SPI Asset Management, told MarketWatch.
“‘Factors influencing oil markets include the macroeconomic landscape in the U.S., China’s recent Loan Prime Rate (LPR) cut, tight market dynamics versus OPEC spare-capacity concerns, rising U.S. oil production versus OPEC compliance, and ongoing geopolitical tensions in the Middle East.’”
“The intricate web of factors influencing oil markets includes the complex … macroeconomic landscape in the United States, China’s recent Loan Prime Rate (LPR) cut, tight market dynamics versus OPEC spare-capacity concerns, rising U.S. oil production versus OPEC compliance, and ongoing geopolitical tensions in the Middle East,” he said. “So, the resulting headline noise from these shifting narratives creates far too many moving pictures to have a salient short-term view of the market.”
Last week, concerns over rising inventories, elevated inflation and disappointing U.S. economic indicators capped oil prices and overall risk sentiment, Innes said.
This week, however, some optimism in the market is partly attributable to robust economic data and a “broader risk-on sentiment.” So aside from unforeseen supply shocks or an escalation in the Middle East that throttles production, “perhaps we can stay rangebound” into the second half of the year, he said.
