Oil futures erased early losses Friday, and remained on track for weekly gains as traders shook off weakness that followed a news report that the United Arab Emirates were internally debating whether to leave the Organization of the Petroleum Exporting Countries.
Crude has rallied this week, buoyed by optimism over Chinese demand, though upside has been tempered by concerns over shifting expectations the Federal Reserve and other central banks will lift interest rates higher than previously thought to rein in inflation.
Price action
- West Texas Intermediate crude for April delivery CL.1, +1.69% CL00, +1.69% CLJ23, +1.69% rose 97 cents, or 1.2%, to $79.13 a barrel on the New York Mercantile Exchange, on track for a 3.6% weekly gain.
- May Brent crude BRN00, +1.16% BRNK23, +1.16%, the global benchmark, was up 59 cents, or 0.7%, at $85.32 a barrel on ICE Futures Europe, headed for a 3.1% weekly advance.
- Back on Nymex, April gasoline RBJ23, +1.59% rose 1.1% to $2.73 a gallon, while April heating oil HOJ23, +1.71% was up 1.3% at $2.903 a gallon.
- April natural gas NGJ23, +8.03% rose 4.8% to $2.898 per million British thermal units, on track for a 13.8% weekly advance.
Market drivers
Brent fell as low as $82.51 a barrel after a report by The Wall Street Journal detailing strained relations between Saudi Arabia and United Arab Emirates.
The report, citing Emirati officials, said U.A.E. is having an internal debate over leaving the Organization of the Petroleum Exporting Countries. U.A.E. leaders have talked of leaving OPEC for years without taking action, the report said, but recent disagreements with Saudi Arabia have rekindled interest.
The most intense disagreement is over Yemen, where Saudi Arabia and the U.A.E. led an intervention by an Arab military coalition in 2015, the report said. The countries also clashed behind the scenes last year, when OPEC+ — made up of the cartel and its Russia-led allies — agreed to substantially cut crude production over the objections of the Biden administration. While the U.A.E. publicly supported the cut, officials privately told their U.S. counterparts that they wanted to pump more, the report said.
Crude logged a third straight winning session Thursday “on overall market optimism over a Chinese economic recovery,” wrote analysts at ING, in a note. Upbeat survey-based data on economic activity in China released earlier this week helped set the tone.
Meanwhile, the price for spot and nearby Brent crude traded at a premium over later futures, a condition known as backwardation, that reflects increased near-term demand, they noted. The spread for the nearby contract over the next month BRNM23, +1.25% hit a three-month high of 66 cents a barrel on Thursday.
At the same time, positive economic data out of the U.S. continues to stoke worries the Federal Reserve will be more aggressive than previously expected in its bid to bring down inflation, raising the threat of a deep economic downturn.
Natural gas has fallen sharply in 2023, but was on track for a solid weekly gain.
“Amid a particularly bearish winter, the near-term weather outlook has turned more balanced of late, with the potential for some above-average heating demand midmonth,” said Robbie Fraser, manager of global research and analytics at Schneider Electric in a note. Meanwhile, the warmest parts of the country are beginning to approach temperatures that could trigger some additional cooling demand, he said.
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