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Oil futures turned lower on Friday, but held onto a weekly gain of more than 5% as investors continued to monitor unrest in Kazakhstan that threatens to add to supply outages that have helped boost crude prices.
Violent protests, sparked by a sharp rise in fuel prices, have rocked Kazakhstan this week, with scores of protesters and ore than a dozen law enforcement officers killed. The internet across the country was shut down, and two airports, including on in Almaty, the nation’s largest city were closed. On Friday, the country’s president said order had been restored. The government also announced a 180-day price cap on vehicle fuel and a moratorium on utility rate increases.
Kazakhstan is worrisome because it does export about 1.5 million barrels of oil per day and “the violence is near the oil producing center,” Michael Lynch, president at Strategic Energy & Economic Research, told MarketWatch. Lynch pointed out that he hasn’t heard of any disruptions to oil supplies so far.
“If protests continue and oil workers join the strike, you could lose a noticeable piece of global supply, again, when the market is already tight,” he said.
West Texas Intermediate crude for February delivery
CL00,
CLG22,
was down 31 cents, or 0.4%, at $79.15 a barrel on the New York Mercantile Exchange, but remained on track for a 5.3% weekly rise, according to FactSet data. March Brent crude
BRN00,
BRNH22,
the global benchmark, lost 3 cents, or less than 0.1%, to $81.96 a barrel on ICE Futures Europe, set for a 5.4% weekly rise.
Kazakhstan “represents yet another risk supply disruption given the epicenter of the unfolding unrest and a ‘technical adjustment’ having already occurred at the Tengiz oil field,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.
The operator of the Tengiz oil field, the country’s largest at 600,000 barrels a day, on Thursday said it had made a technical adjustment due to logistics issues, S&P Global Platts reported. Kazakhstan is the largest producer in the former Soviet Union at around 1.6 million barrels a day.
“Overall, with around 1 [million barrels a day] of production currently offline because of disruptions in Ecuador, Libya and Nigeria, further outages would be particularly unwelcome for the Biden administration as it faces a consumer backlash over rising gasoline prices in advance of the midterm elections,” Croft said.
In Friday dealings, February gasoline
RBG22,
tacked on 0.1% to $2.307 a gallon, trading close to 4% higher for the week, and February heating oil
HOG22,
added 0.3% to $2.485 a gallon, looking at a weekly rise of 7%.
February natural gas
NGG22,
traded at $3.891 per million British thermal units, up 2.1% in Friday trading, up nearly 5% for the week.
For now, the unrest in Kazakhstan overshadows the tensions between Russia and Ukraine, as well as the Iran nuclear deal negotiations, said Lynch. “If there was positive news from the nuclear talks, “that would send prices lower for sure, but that doesn’t seem likely in the near future.”
