AFP/Getty Images
U.S. benchmark oil futures saw a modest decline on Friday, booking a loss of nearly 3% for the week, the first weekly loss since mid August.
Concerns over the potential for weaker energy demand on the back of global trade tensions pressured prices, but expectations for tighter supplies as U.S. oil sanctions on Iran go into effect later this year provided some support.
October West Texas Intermediate crude CLV8, +0.13% the U.S. oil benchmark, fell 2 cents to settle at $67.75 a barrel on the New York Mercantile Exchange—the lowest finish for the contract since Aug. 21, according to FactSet data. The contract marked a 2.9% weekly loss, after two consecutive weeks of gains.
November Brent LCOX8, +0.78% the global benchmark, however, tacked on 33 cents, or 0.4%, to settle $76.83 a barrel on the ICE Futures Europe exchange, marking a reversal from earlier declines that sent prices to an intraday low of $75.88. It settled down 1% for the week.
WTI prices are “still a mile away from August lows suggesting [a] bid on dips strategy remains in vogue as the long-term buy and hold traders stay focused on Iran sanctions, Chinese refineries unquenchable demand and a slightly improving sentiment in [emerging] markets,” said Stephen Innes, head of Asia Pacific trading at OANDA. In August, WTI settled at lows around $65.
The long strategy for oil comes “down the “’64 million-dollar question’: how much oil will be removed from the global supply chain due to Iran sanctions,” said Innes. “If the impact falls between the markets uppermost estimate, 1-1.5 million barrels, oil prices will ignite much higher given the frangible state of the supply and demand equation.” Impending U.S. sanctions on Iran’s oil industry, set to take effect in November, may lead to tighter global supplies of crude.
The U.S. has reportedly considered waivers on the Iran sanctions for India, which is among Iran’s biggest crude customers, but “all in all, there is no reason to believe that we will see a turnaround in crude. It will continue to trend in this bear market for the following week,” said Nicholas Gunther, market research analyst at Long Leaf Trading Group.
The potential for new U.S. tariffs on Chinese goods has also contributed to concerns over the potential for weaker energy demand.
Near term, oil is “likely to continue to remain under pressure…reflecting concerns about waning demand growth,” said Rob Haworth, senior investment strategist at U.S. Bank.
“Over the rest of the year we expect oil prices to remain range bound,” he said. “Softer production growth from the U.S. (due to transportation constraints in certain regions) as well as Iran and Venezuela will help provide a floor for prices.”
Meanwhile, strength in the U.S. dollar Friday also pressured prices for dollar-denominated oil. The benchmark ICE U.S. Dollar index DXY, +0.33% tacked on 0.4%, boosted by better-than-expected growth in U.S. jobs in August and a sharp increase in pay. The U.S. created 201,000 new jobs in August, keeping the unemployment rate at an 18-year low, and the yearly rate of pay increases climbed to 2.9% from 2.7%, marking the highest level since June 2009.
Back on Nymex Friday, petroleum-product prices ended higher, with October gasoline RBV8, +1.28% up 1% at $1.97 a gallon, paring its weekly loss to about 1.4%. October heating oil HOV8, +0.57% added 0.4% to $2.218 a gallon, settling about 1.1% lower on the week.
October natural gas NGV18, +0.11% finished at $2.776 per million British thermal units, up 0.1% Friday, but marking at a weekly drop of 4.8%.
“Natural-gas supplies should continue to build in the coming weeks as record production will overwhelm supply,” said Phil Flynn, senior market analyst at Price Futures Group.
Oil prices on Friday showed little reaction to weekly data from Baker Hughes that showed the number of rigs drilling for oil in the U.S. fell by 2 to 860 this week. The total active U.S. rig count was unchanged at 1,048.
Monthly oil market reports also expected next week from the EIA Tuesday, the Organization of the Petroleum Exporting Countries Wednesday and International Energy Agency on Thursday.
—Christopher Alessi contributed to this article
Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.