U.S. crude benchmark down over 6% this week
Oil futures declined on Friday, with prices posting their biggest weekly percentage fall in at least five months, as fears of a wider U.S.-Iran confrontation faded and data earlier this week showed a rise in U.S. crude inventories.
West Texas Intermediate crude for February delivery CLG20, -0.74% on the New York Mercantile Exchange lost 52 cents, or 0.9%, to settle at $59.04 a barrel, while March Brent crude BRNH20, +0.18% finished at $64.98 a barrel, down 39 cents, or 0.6%, on ICE Futures Europe.
WTI, the U.S. benchmark, was off 6.4% for the week—the biggest weekly percentage loss for a most active contract since July, according to Dow Jones Market Data. Brent, the global benchmark, was off 5.3% for the week, which was the biggest such decline since August.
“The diminished threat of a war in the Middle East and rising U.S. inventories have been a double whammy for oil in past two days,” said Jasper Lawler, head of research at London Capital Group, in a Friday note.
Crude prices have dropped back below levels seen ahead of the U.S. airstrike in Iraq last week that killed Iranian military commander Qassem Soleimani. Iran responded earlier this week with missile strikes aimed at bases housing U.S. forces in Iraq. The attacks produced no U.S. casualties and President Donald Trump on Wednesday indicated he was uninterested in further escalation of the conflict.
The Energy Information Administration on Wednesday said U.S. crude inventories rose by 1.2 million barrels in the previous week, defying forecasts for a decline, while supplies of gasoline and distillates showed bigger-than-expected increases.
“Longer-term, [supply] balances should still trend tighter as US production growth slows and demand looks to shrug off some of the uncertainty around US-China trade relations,” said Robbie Fraser, senior commodity analyst at Schneider Electric.
However, the first quarter “continues to offer plenty of opportunity for inventories to gain ground given strong production levels to start the year and some seasonal demand weakness,” he said in a daily note.
Meanwhile, weekly data from Baker Hughes BKR, -0.72% on Friday revealed a third consecutive weekly decline in the number of active U.S. oil rigs, implying a potential production slowdown.
Oil futures traded little changed in the immediate wake of the release of the U.S. December employment report, then moved lower. The report showed the U.S. economy created a smaller-than-expected 145,000 jobs in the final month of 2019, while the unemployment rate was unchanged at 3.5%. Analysts surveyed by MarketWatch had forecast, on average, a rise of 165,000, with Wall Street expecting a drop-off after a surprisingly robust 256,000 gain in November.
In other energy trading, February gasoline RBG20, +0.42% rose 0.4% to $1.6596 a gallon, with prices losing 5.1% for the week, while February heating oil HOG20, -0.67% fell 1.1% at $1.9284 a gallon, building a weekly loss of about 6.5%. February natural gas NGG20, +1.89% added 1.7% at $2.202 per million British thermal units, contributing to a weekly rise of 3.4%.
Gasoline prices at the retail level in the U.S. may see a peak in the $2.90 a gallon area this year, with the “typical timings [of] mid to late May for a high,” Denton Ciquegrana, chief oil analyst at OPIS by IHS Markit, told MarketWatch in recent comments. During that part of the year, prices see a typical ramp up to the summer driving season and the transition to a more environmentally-friendly blend of gasoline “always comes with some snags,” he said.
But prices do have the potential to top $3 a gallon on average this year, for the first time since 2014—and that’s regardless of the developments in the Middle East, according to Patrick DeHaan, head of petroleum analysis at GasBuddy.