LONDON: Oil prices settled lower in the outgoing week, making their weekly finish flat to lower, as indications of strong Russian oil supply offset better-than-expected U.S. economic growth data, strong middle distillate refining margins and hopes of a rapid recovery in Chinese demand.
Brent futures settled down 81 cents to $86.66 per barrel, up just 3 cents from last week's settlement. U.S. crude fell $1.33 to settle at $79.68, 2 percent lower on the week.
Oil loadings from Russia's Baltic ports are set to rise by 50 percent this month from December as sellers try to meet strong demand in Asia and benefit from rising global energy prices, traders said and Reuters calculations showed.
"If Russian supply remains strong heading into next month, oil is probably going to continue to trend lower," said John Kilduff, partner at Again Capital LLC in New York.
He added that profit taking ahead of the weekend may also have driven prices lower.
U.S. energy firms this week kept oil and natural gas rigs steady at 771, energy services firm Baker Hughes Co BKR.O said in its closely followed report on Friday.
Oil traders aimed to book profits ahead of the end of month and took a “safe position” ahead of the an OPEC+ committee meeting and the Federal Reserve’s monetary policy decision both on Feb. 1, and the European Union’s ban on imports of Russian oil products on Feb. 5, said Phil Flynn, senior market analyst at The Price Futures Group.
Market analysts pointed to several factors for the recent rise in crude-oil prices, including a U.S. economy that’s holding up stronger than expected, China’s reopening after lifting COVID restrictions, and the expectation that the Organization of the Petroleum Exporting Countries and its allies won’t boost production.
“OPEC remains a critical piece of the puzzle,” said Stephen Innes, managing partner at SPI Asset Management, in emailed commentary. “Because of the voiced frustration with the Western energy policies, including the price cap on Russian oil, and the risk it creates precedents, it will most certainly limit the group’s willingness to raise production and play ball with the West.”
The OPEC+ Joint Ministerial Monitoring Committee (JMMC), which reviews the oil market and has no ability to make official production policy decisions, will meet on Feb. 1. The next full meeting of the policy-setting OPEC+ is scheduled for June.
Oil agencies expect “solid global oil demand growth with a significant contribution from China, and subject to the burden of proof, many traders think it could push the market back into deficit from June onwards” and drive Brent back up to $105 a barrel by the fourth quarter of this year, said Innes.
“However, if the oil market turned out to be softer than most forecast, then OPEC should be able to put a floor under prices given its strong pricing power,” he said. “OPEC could keep its production lower for long beyond its June 4th meeting or implement further cuts.”
Traders will also weigh the impact of the EU ban on imports of Russian oil products, and an expected price cap on Russia oil products on Feb. 5.
The coming price cap on Russian refined products proposed today of $100 per barrel on premium oil products and $45 per barrel on low value products “relieved fears of a major constraining impact set to follow from this coming price cap,” Troy Vincent, senior market analyst at DTN, told MarketWatch.
The proposed caps “wouldn’t be restrictive for diesel or gasoline sales at current market prices.”
Meanwhile, natural-gas futures saw a strong rebound on Friday, the front-month contract’s expiration day, after settling Thursday at the lowest since May 2021. Prices still fell for the week, and trade over 30% lower year to date.
“Mild weather forecasts, elevated production levels, and healthy inventory levels are all contributing to the sharp downtrend right now,” analysts at Sevens Report Research wrote in Friday’s newsletter. “Futures remain oversold and a potentially violent short-covering rally is possible near term, but there is no sign of a bottom forming in the natural-gas market yet.”