Oil futures drifted into negative territory Friday, but remained on track for weekly gains as concerns over supply appeared to take over the spotlight from longer-term worries over global economic growth and the outlook for crude demand.
West Texas Intermediate crude for December delivery
on the New York Mercantile Exchange was off 10 cents, or 0.2%, at $56.13 a barrel, but was on track for a 4.4% weekly advance after ending Thursday at a nearly one-month high. December Brent crude
the global benchmark, was off 7 cents, or 0.1%, at $51.60, but on track for a 3.7% weekly rise.
The driver for gains this week came from the surprise drop in U.S. oil and product inventories reported by the Energy Information Administration on Wednesday, said Warren Patterson, head of commodities strategy at ING, in a note.
The EIA on Wednesday reported that U.S. crude supplies fell for the first time in six weeks, down 1.7 million barrels for the week ended Oct. 18. Separately, supplies of oil from the U.S. Strategic Petroleum Reserve, or SPR, fell by 1 million barrels for the week. Petroleum products gasoline and distillate also saw declines in stockpiles.
Disruptions to output in the North Sea earlier this week also contributed to the tone, he noted. Traders will be paying attention Friday afternoon to the latest weekly tally of U.S. drilling rigs by oil-field services firm Baker Hughes.
Speculation is also swirling around the Organization of the Petroleum Exporting Countries and its allies, namely Russia, and their willingness to extend and deepen an agreement on output cuts that’s due to expire in April.
While Russian officials have expressed reluctance, such reticence has become almost a “rite of passage in the run-up to OPEC meetings,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.
Russian President Vladimir Putin’s recent visit to Saudi Arabia and the United Arab Emirates “yielded a host of lucrative new deals that should sufficiently compensate for curbing output,” she said. “While Saudi Arabia seems focused on ensuring all members honor their commitments, we think a deeper cut is very much a live option given growing demand concerns and domestic fiscal needs.”
Meanwhile, November gasoline
was off 0.4% at $1.6562 a gallon, while November heating oil
was off 1% at $1.9658 a gallon. November natural-gas futures
were off 0.9% at $2.294 per million British thermal units.