Oil futures fell on Friday, with U.S. benchmark prices hitting their lowest level in more than two weeks.
Another Federal Reserve official threw cold water on the prospects of short-term interest rate cuts, raising concerns about the economy and oil demand, while a rise in the number of active oil rigs in the United States fueled expectations of greater internal production.
Price action
-
West Texas Intermediate crude oil with delivery in April CL00,
-2.48% CL.1,
-2.48% CLJ24,
-2.48%
fell $2.12, or 2.7%, to settle at $76.49 a barrel on the New York Mercantile Exchange. According to market data from Dow Jones, prices of one-month contracts saw a weekly decline of 2.5% and stood at their lowest level since February 8. -
April Brent crude oil BRN00,
+0.16% BRNJ24,
+0.16% ,
the global benchmark, lost $2.05, or nearly 2.5%, to $81.62 a barrel on ICE Futures Europe. Brent fell 2.2% on the week, closing at its lowest level since February 14. -
March petrol RBH24,
-2.45%
lost 2.5% to $2.28 a gallon, closing the week down 2.5%, while March heating oil HOH24,
-2.40%
fell 2.3% to $2.69 a gallon, losing 4.2% for the week. -
Natural gas for delivery March NGH24,
-7.97%
stood at $1.60 per million British thermal units, down nearly 7.5% on Friday, posting a weekly loss of 0.4%.
Market drivers
Fed Governor Chris Waller said on Thursday there was “no rush” to cut interest rates following stronger-than-expected economic and inflation data since the start of the year. Waller and other Fed officials have made a concerted effort in recent weeks to push back on Wall Street’s previous predictions of rate cuts as early as March.
Solid data “provides the Fed with greater leeway to sustain its restrictive monetary policy for an extended period. This dynamic limits economic growth and suggests reduced future demand for oil, contributing to falling prices,” Ricardo Evangelista, senior analyst at ActivTrades, said in a note.
“However, downside risk to the price of a barrel remains limited by supply-side concerns arising from ongoing geopolitical turmoil in the Middle East,” he said.
In a graph: Because a drop in oil 10 years ago suggests the U.S. stock market is headed for a decline
In the United States, however, the increase in the number of active oil rigs has highlighted the potential for further gains in domestic production already at record levels.
Baker Hughes Co. BKR,
reported Friday that the number of U.S. oil rigs increased by six this week to 503, following a decline of two oil rigs the previous week.
Overall this week, analysts have been “chasing price action rather than predicting it,” due to “price action fluctuating without clear direction,” Stephen Innes, managing partner at SPI Asset Management, told MarketWatch.
“Factors influencing oil markets include the macroeconomic landscape in the US, China’s recent Loan Prime Rate (LPR) cut, tight market dynamics versus OPEC spare capacity concerns, rising US oil production with respect to OPEC compliance and ongoing geopolitical tensions in the Middle East. ‘“
“The intricate web of factors influencing oil markets includes the complex… macroeconomic landscape of the United States, China’s recent Loan Prime Rate (LPR) cut, tight market dynamics versus OPEC spare capacity concerns, increased U.S. oil production relative to OPEC compliance and continued geopolitical tensions in the Middle East,” he said. “So, the headline noise that results from these shifting narratives creates too many moving images to have a salient short-term view of the market.”
Last week, concerns about rising inventories, high inflation and disappointing U.S. economic indicators limited oil prices and overall risk appetite, Innes said.
This week, however, some optimism in the market is partly attributable to robust economic data and “broader risk-on sentiment.” So, barring unexpected supply shocks or an escalation in the Middle East that limits production, “maybe we can stay within a limited range” in the second half of the year, he said.