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U.S. oil benchmark gains for the session Friday, but weekly loss is first in five weeks

By Mayra P. Saefong

SAN FRANCISCO
Petroleumworld 10 12 2018

Prices for the U.S. oil benchmark edged higher Friday as investors assessed the next leg of a volatile stock market, but signs of rising crude supplies contributed to an overall weekly loss of 4%.

“While there are risks of Middle East conflicts and further outages in production, growing output from the U.S., Saudi Arabia and Russia is likely to keep markets reasonably supplied,” said Rob Haworth, senior investment strategist at U.S. Bank.

Also helping to keep prices in check were “fears of an economic slowdown, which could damage [oil] demand growth,” he said.

November West Texas Intermediate crude CLX8, +0.76% rose 37 cents, or 0.5%, to settle at $71.34 a barrel on the New York Mercantile Exchange. It suffered a weekly loss about 4%. The global benchmark, Brent crude for December delivery LCOZ8, +0.42% on the ICE Futures Europe exchange, added 17 cents, or 0.2%, to $80.43 a barrel after briefly dipping as low as $79.23. It posted a weekly decline of roughly 4.4%.

Both benchmarks, which registered their first weekly declines in five weeks, shed some 3% Thursday. They were moving in step with a two-day selloff across global stock markets — a move that raised concerns about economic resiliency and eventual energy consumption. Global equities climbed and benchmark U.S. stock indexes were moving higher on Friday, however.

Overall, production data remain the overarching driver of market sentiment.

A monthly report from the Organization of the Petroleum Exporting Countries released Thursday revealed a rise in OPEC and Russian crude-oil production in September, more than making up for a continuing decline in Iranian output ahead of the implementation of U.S. sanctions on Iran's oil industry. Earlier this week, the Energy Information Administration boosted its forecast for U.S. oil production , which added another headwind.

OPEC lowered its global oil demand growth forecast for this year and next, the third month in a row for a downgrade.

On Friday morning, the International Energy Agency shared that view, saying global oil demand will grow at a slower pace than initially expected this year and next amid economic risks stemming from trade tensions and higher oil prices.

“At the heart of this softening oil demand backdrop are a myriad of downward pressures on the global economy,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd. “They include rising trade tensions, Fed policy tightening, and emerging-market weakness.”

Back on the supply front, the EIA reported Thursday that domestic U.S. crude supplies climbed by 6 million barrels for the week ended Oct. 5. The increase was much larger than expected.

“Indeed, it's hard to sugar coat this week's inventory data, but for perpetual bulls like my self, if risk stabilizes around improving U.S.-China tension, there are some very cheap entry points on offer,” said Stephen Innes, Asia-Pacific head of trading at Oanda, noting support near and around $80 Brent.

Data from Baker Hughes BHGE, +0.62% Friday showed that the number of active U.S. rigs drilling for oil , which offers a peek at output activity, climbed by 8 to 869 this week. That followed three straight weeks of declines and was the largest weekly increase since the week ended Aug. 10.

As for the petroleum products, November gasoline RBX8, +0.76% added 0.5% to $1.942 a gallon. The contract dropped by 4.3% to $1.933 a day earlier — the lowest finish since March. It lost 6.9% for the week. November heating oil HOX8, -0.25% lost 0.5% to $2.321 a gallon, for a weekly loss of 3%.

November natural gas NGX18, -2.36% declined by 1.9% to $3.161 per million British thermal units on Friday, but saw a weekly rise of about 0.6%.

Earlier this week, natural-gas futures climbed to their highest settlement since January. “It has become clear that recent price gains are being driven by lower inventories heading into the peak demand winter season and not by the short-term storm shut-ins” in the Gulf of Mexico due to Hurricane Michael, said Colin Cieszynski, chief market strategist at SIA Wealth Management.

U.S. natural-gas supplies in storage stand at about 17% below the five-year average, according to the EIA.

Christopher Alessi contributed to this report.

________________________

Story by Mayra P. Saefong; Editor Rachael Koning Beals from MarketWatch.

marketwatch.com
10 12 2018 20:02 GMT

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