Oil prices rise slightly, but suffer a loss for the week

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Oil futures traded higher on Friday, but the potential for an Iran nuclear deal that could lead to a boost in global supply and the potential for a slowdown in energy demand have kept prices lower for the week.

price action
  • West Texas Intermediate crude for delivery in September CLU22,
    -0.44%

    CL.1,
    -0.44%
    rose 27 cents, or 0.3%, to settle at $90.77 a barrel on the New York Mercantile Exchange, as first-month contract prices settled at their highest level in a week. WTI was down 1.4% for the week, according to Dow Jones Market Data.

  • October Brent crude BRNV22,
    -0.75%

    BRN00,
    -0.75%,
    the global benchmark, added 13 cents, or 0.1%, to $96.72 a barrel on ICE Futures Europe. It lost 1.5% over the week.

  • Back to Nymex, September gasoline RBU22,
    -0.86%
    fell 0.3%, to $3.0175 per gallon, posting a weekly loss of 0.9%, while in September HOU22 fuel oil,
    +1.02%
    added 1.4% to $3.7005 a gallon, ending up 5.2% for the week.

  • September natural gas NGU22,
    +1.27%
    stood at $9.336 per million British thermal units, up 1.6% for the session to climb 6.5% for the week. It surpassed Tuesday’s price close to mark a new 14-year high.

Market factors

“The energy market in the United States is a soft sail from complete chaos in Europe, where a trifecta of a huge [natural] gas shortage, a tragic drought and insane electricity prices [have] shook the markets,” Manish Raj, chief financial officer of Velandera Energy Partners, told MarketWatch.

Oil prices ditched declines early on Friday, even with benchmark U.S. stock indexes lower as investors braced for more volatility amid fears the Federal Reserve is far from done with price hikes. interest rate.

Much of the downside pressure on oil this week came from “the dollar’s blistering streak, hitting 1-month highs and gaining more than 2.5% over the past 6 trading sessions,” the analysts wrote. from the Kansas City energy team at StoneX in a Friday newsletter.

Federal Reserve officials talked about the need for further rate hikes, and investors appeared to reassess Wednesday’s minutes from the U.S. central bank’s July meeting “as being more hawkish than before,” it said. they stated. “It appears that many officials are in favor of another rate hike of 50 to 75 points in September.”

Oil traders have worried about the possibility of a rise in U.S. interest rates that could lead to a recession and reduce demand for the commodity.

Meanwhile, supporting a mixed price environment for oil, which rose on Friday but fell for the week, data on Wednesday from the Energy Information Administration showed “robust demand, while Russia showed its solid ability to find new buyers” for its oil, Raj said.

Next week’s EIA report will be closely watched “to see if this week’s high demand was just an anomaly or the new normal,” he said.

Oil traders have also been keeping tabs on developments related to the Iran nuclear deal. A revival of the deal could lead to the United States lifting sanctions on Iran which, in turn, would be allowed to bring more oil to the world market.

The Iran nuclear deal appears to be “stuck in a vacuum, crushing hopes for additional supplies”, Raj said.

See: Deal with Iran extremely close but US faces new hurdles

Elsewhere in energy trading, natural gas futures finished higher after posting back-to-back losses. They surpassed Tuesday’s settlement to mark a new 14-year high.

Russian state energy exporter Gazprom said on Friday it would close the Nord Stream gas pipeline to Germany for three days for maintenance later this month, according to the Wall Street Journal.

Lily: Why natural gas prices are holding near 14-year highs

Also see: Diesel and natural gas prices remain high, fueling food price inflation

Russian “sticky” oil

Russian crude production holding up better than expected prompted Warren Patterson, head of commodities strategy at ING, to revise his oil forecast downwards in a memo dated friday titled “Sticky Russian Oil Production Needs a Raw Overhaul”.

ING’s third- and fourth-quarter forecasts for Brent were cut from $118 a barrel and $125 a barrel to $100 and $97, respectively. ING’s forecast for Brent for the year 2023 has been cut from $99 to $97, he said.

“Since the invasion of Ukraine by Russia, it has become more difficult to obtain transparency on Russian oil production, with the government no longer publishing monthly data. However, the IEA estimates that Russian oil production was around 310 mb/d below pre-war levels in July. The decline in production was much more modest than many in the market expected, despite the sanctions,” Patterson said.

“Stubborn Russian oil production and weaker-than-expected demand growth means the oil market is likely to remain in surplus for the rest of this year and early next year, which should limit the rise in oil prices. The time spreads also point to a looser market, with the offset from the fast spreads narrowing significantly in recent weeks,” he added.

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