Oil prices posted sharp losses Friday, trimming the November gain, as the much-anticipated approval of a production-cut extension at next week’s OPEC meeting grew more doubtful following speculative reports.
Saudi Arabia probably will indicate it’s no longer willing to compensate for excessive production by other members of the Organization of Oil Exporting Countries, according to people familiar with the kingdom’s thinking, a Bloomberg report out Friday said.
Traders cited that report as helping drive futures down some 5% in an abbreviated, post-holiday session in New York after a quiet start, a move that brought the weekly decline to about 4.5% for the January contract, the steepest weekly retreat for it since early October, according to Dow Jones Market Data. Expectations for the cartel to possibly extend expiring production agreements beyond March when the group meets in Vienna on Dec. 5-6 had driven oil prices to their highest since September as recently as a week ago.
Further, Russian Energy Minister Alexander Novak said he would prefer if OPEC and its non-OPEC allies made a decision closer to April on whether to extend their now three-year-old production coordination pact, Russia’s TASS news agency reported Thursday. Russia is considered to be part of OPEC+ with its role as a major producer and policy-influencer, although it is not officially in the cartel.
“Oil prices fell almost 5% as fears grew that Russia will block an OPEC+ quota extension,” said Fawad Razaqzada, technical analyst with FOREX.com, who also tracks commodities markets. “WTI was still holding above the November low of $54.75… but if that level gives way then more losses could be on the way in early next week ahead of OPEC’s meeting later on in the week.”
At Friday’s early close, West Texas Intermediate crude futures for January delivery CLF20, -4.63% were down $2.94, or 5.1%, at $55.17 a barrel on the New York Mercantile Exchange. the January contract is up 1.8% for the month, the largest single-month percentage gain since June, Dow Jones Market Data showed.
January Brent crude BRNF20, +0.02%, the global marker, fell $1.44, or 2.3%, at $62.43 a barrel on ICE Futures Europe. January Brent expired at Friday’s close. The contract wrapped the week’s trading down 1.5%, trimming its gain for the month to roughly 3.7%. November’s performance for the contract marked the largest one-month gain since April.
Oil also traded lower amid the release of news reports in which London police said a “terrorist incident” took place in the busy central part of the city.
A combination of expectations for improved OPEC compliance with existing production curbs, expectations for a possible extension of output cuts from the group beyond March 2020, at least according to some analysts, and slowing U.S. production growth had all added up to the bullish picture until Friday.
Global trade issues and their likely impact on oil consumption was another driver. Tentative progress had helped push U.S. stock markets to fresh records, lifting risk markets all around, including most commodities. But the U.S. move by President Trump to sign into law the Human Rights and Democracy Act in favor of Hong Kong and against mainland authorities was “not exactly well received by China and… set to somewhat further complicate the anyway delicate trade negotiation,” analysts at JBC Energy said in a note.
Oil prices slipped Wednesday after official U.S. inventory data posted an unexpected rise in the latest week but remained near their highest levels in about eight weeks. Crude inventories rose by 1.6 million barrels in the week ended Nov. 22. The last outright drawdown in the official data was in mid-October.
The futures market showed little reaction Wednesday to the early release from Baker Hughes BKR, -0.58% of weekly rig count data. The U.S. count was down one rig from last week to 802, with oil rigs down three to 668, gas rigs up two to 131, and miscellaneous rigs unchanged at three. The U.S. rig count is down 274 rigs from last year’s count of 1,076, with oil rigs down 219, gas rigs down 58, and miscellaneous rigs up 3 to 3. The report is usually released on Friday.
In other energy trading Friday, December gasoline RBZ19, -5.29% was down 4.9% at $1.5970 a gallon, down 4.6% for the week and down 2.1% for the month. December heating oil HOZ19, -3.57% fell 3.5% to $1.8789 a gallon, down 2.6% for the week and virtually unchanged on the month. Both contracts expired at settlement.
January natural-gas futures US:NGZ19 traded down 8.8% to $2.2810 per million British thermal units, having fallen for four sessions in a row through Friday. The market has been in retreat amid a forecast for milder weather for the period after Thanksgiving. For the week, the contract shed 15.8% and for all of November, the January contract is down just over 13%.