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U.S. oil ends nearly flat Friday, as Brent declines, but both benchmarks tally fourth weekly climb in a row

By Mayra P. Saefong

SAN FRANCISCO
Petroleumworld 10 05 2018

U.S. oil prices ended nearly flat on Friday and global crude finished lower, as the market continued to question the ability of the world's major producers to make up for losses of Iranian crude exports tied to pending U.S. sanctions.

Still, both crude benchmarks tallied a fourth weekly advance in a row. Both had marked their highest settlements in nearly four years on Wednesday.

November West Texas Intermediate crude CLX8, -0.05% the U.S. benchmark contract, tacked on a penny to settle at $74.34 a barrel on the New York Mercantile Exchange. It settled at a nearly four-year high of $76.41 on Wednesday, but notched its biggest one-day percentage decline since mid-August on Thursday . December Brent LCOZ8, -0.56%  lost 42 cents, or 0.5%, to end at $84.16 a barrel on ICE Futures Europe.

For the week, based on front-month contracts, WTI rose 1.5%, while Brent crude advanced by 1.7%.

The Organization of the Petroleum Exporting Countries 15 members raised their crude-oil output in September to 33.07 million barrels a day—a 180,000-barrel-a-day rise from August, according to an S&P Global Platts survey of analysts, industry officials and shipping data released Friday.

The survey said “that is the most OPEC has pumped since July 2017, if the Republic of Congo, which joined the organization in June, is not included.”

The figures also show that OPEC and its 10 non-OPEC partners, led by Russia, “have surpassed their stated aim of raising production by a combined 1 million b/d from May levels.”

Herman Wang, senior writer, oil news at S&P Global Platts, pointed out to MarketWatch that OPEC, plus Russia, have surpassed the 1 million-barrel-a-day output rise, but “OPEC on its own is 850,000 [barrels a day] above its May level.” OPEC had agreed in June to rein in member production cuts that began in January 2017.

‘There are definitely dark storm clouds ahead for the market, with Iranian and Venezuelan production on a downward spiral.' Herman Wang, S&P Global Platts

“There are definitely dark storm clouds ahead for the market, with Iranian and Venezuelan production on a downward spiral,” said Wang. “It appears OPEC and its allies are going to have to do more, to avoid the price spike that President [Donald] Trump is fretting, but there's significant doubt about how much OPEC is willing and able to pump.”

Trump's decision to pull out of a 2015 international agreement to curb Iran's nuclear program, and a reimposition of economic sanctions on the third-largest producer of crude set to kick next month have been pivotal in driving crude futures to recent multiyear peaks.

Uncertainty remains over whether major oil producers, including members of OPEC and key non-OPEC members, like Russia, have the spare capacity to make up for the loss of Iranian exports.

“The two key uncertainties the oil market has to grapple with are first the spare capacity to replace Iranian barrels and, second, the unknown magnitude of these lost volumes due to a lack of clarity from the U.S. administration,” wrote Goldman Sachs commodity analysts, including Damien Courvalin and Jeffrey Currie, in a recent research note.

Goldman estimates a loss of 1.5 million barrels a day in the fourth quarter from the sanctions, but the analysts “acknowledge that the uncertainty on the size of the disruption will only start to be lifted after Nov. 4 when the sanctions go into effect.”

Meanwhile, monthly data on U.S. employment were mixed , providing little guidance for oil in terms of health of the economy and demand for crude. The U.S. unemployment rate sank to 3.7% in September, while the economy added 134,000 new jobs—the smallest increase in 12 months.

Data from Baker Hughes BHGE, -1.39%  on Friday showed that the number of active U.S. rigs drilling for oil , a key barometer of activity in the sector, fell by 2 to 861 this week. That marked a third consecutive weekly decline.

Back on Nymex, petroleum-product futures ended lower, with November gasoline RBX8, -0.61%  down 0.7% at $2.086 a gallon and November heating oil HOX8, -0.45%  losing 0.3% at $2.392 a gallon. Both finished higher for the week.

November natural gas NGX18, -0.32%  shed 0.7% to $3.143 per million British thermal units, but saw a weekly rise of 4.5%.

________________________

Story by Mayra P. Saefong from MarketWatch.

marketwatch.com
10 05 2018 19:25 GMT

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