Oil Drops After Biggest Gain in a Month
(Bloomberg) -- Oil slid after surging the most in almost a month on Friday amid doubts that recent progress in the U.S.-China trade talks will compensate for a worsening global demand outlook.
Futures in New York fell as much as 1.4% after gaining 2.2% in the previous session. Washington and Beijing made several concessions to reach a partial trade deal last week, and are aiming for a more comprehensive agreement before the end of the year. Prices gained on Friday as an attack on an Iranian crude tanker in the Red Sea stoked tension in the Middle East.
Despite positive momentum in the trade negotiations, and an array of threats to oil supply in recent months including an attack on Saudi Arabia’s oil facilities, unrest in Iraq and Ecuador and the economic unraveling of Venezuela, traders continue to fret that faltering consumption and robust U.S. crude production will lead to a global surplus next year. Hedge fund bets that West Texas Intermediate futures will decline have more than doubled in the last three weeks.
“The oil market verdict continues to be bearish, both for the nearest months and for next year,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB. “The concerns over the attacks on the Iranian oil tanker last week are evaporating and the optimism over the U.S.-China trade deal is fading.”
WTI for November delivery dropped 50 cents, or 0.9%, to $54.19 a barrel on the New York Mercantile Exchange as of 10:19 a.m. in London. It advanced $1.15 on Friday, the most since Sept. 16, capping a weekly gain of 3.6%.
Brent crude for December settlement fell 58 cents, or 1%, to $59.93 a barrel on the ICE Futures Europe Exchange after climbing 2.4% on Friday. The global benchmark traded at a premium of $5.65 to WTI for the same month.
“Macro sentiment will be decisive for the oil price in the very short term,” said Helge Andre Martinsen, senior oil market analyst at DNB Bank ASA. “Still, we believe the tight physical crude market eventually will push oil prices higher. We expect to see continued inventory decline into year end, the refinery margins are good, and we expect a significant ramp up of refinery runs in the weeks ahead.”
--With assistance from James Thornhill.
To contact the reporters on this story:
Elizabeth Low in Singapore at firstname.lastname@example.org;
Grant Smith in London at email@example.com
To contact the editors responsible for this story:
James Herron at firstname.lastname@example.org
Helen Robertson, Amanda Jordan
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.