Oil prices end week up ahead of OPEC meeting
NEW YORK — Oil prices were up slightly in heavy, seesaw trading on Friday, giving back most earlier gains after news that major producers would consider additional supply a day after US President Donald Trump again blasted the cartel.
Investors grappled with whether the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers will offset a shortfall from Iran once US sanctions go into full force Nov. 4. Major producers are scheduled to gather in Algeria on Sunday.
“The question is just how much oil is going to be taken off the market with US sanctions on Iran,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
Compounding declining production in Venezuela, Iran’s production cuts could lead to a much tighter supply picture, he said, adding: “I think that the market is building up energy for another try at multiyear highs.”
Global benchmark Brent crude settled 10 cents higher at $78.80 a barrel. US light crude rose 46 cents to $70.78 a barrel, more than $1 below the session high of $71.80.
US crude rose 2.5% in the week and Brent posted a 0.7% weekly gain.
In early trade, supply worries sent Brent $1 higher to $80.12 per barrel. Prices retreated after a source told Reuters that OPEC and its allies were discussing the possibility of raising output by 500,000 barrels per day. Then prices rebounded as investors bet Iran’s production cuts would be too great to be fully offset.
The market again reversed course, with traders citing worries US crude would come under pressure in the fourth quarter as inventories build after driving season ends.
On Thursday, Mr. Trump linked American support for Middle Eastern countries to oil prices and again urged OPEC to lower prices. His tweet, the coming OPEC meeting and concerns over looming sanctions on Iran made for jittery trading on Friday.
“Iranian crude exports are coming (down) earlier and bigger than expected, at a time seasonal demand is strong. With spare capacity also falling sharply, the market remains exposed to supply-induced price shocks,” ANZ Bank analysts said in a note.
Investors piled into the trade, betting OPEC cannot compensate fully for the loss of oil from its no. 3 producer Iran. Traders also fretted that sanctions could prompt Iran to try to curtail crude transport on the strait of Hormuz. The Iranian Revolutionary Guards and army carried out a joint aerial military drill in the Gulf on Friday. The news that OPEC may increase production by a half-million barrels quickly quelled those concerns.
Jason Gammel, analyst at US bank Jefferies, said he expects Saudi Arabia to try to keep the market well supplied into 2019, “but at the cost of spare capacity,” which he said “could fall below one percent of demand by yearend if Iranian exports fall below 1 million barrels per day, as now seems likely.” —