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Futures Movers: Oil futures end lower to post a weekly loss of about 11%

Oil futures turned higher on Friday, looking to end the week with a loss of nearly 12% which would be the largest weekly loss for U.S. benchmark crude in more than eight months.

The shutdown of the Keystone Pipeline following news of a leak late Wednesday provided some support to the oil market early Friday, but of greater concern were worries about a global recession and lower crude demand from China.

Price action

West Texas Intermediate crude for January delivery
CL00,
-1.50%

 
CL.1,
-1.51%

 
CLF23,
-1.51%

fell 96 cents, or 1.3%, to trade at $70.50 a barrel on the New York Mercantile Exchange. Prices based on the front-month contract traded 11.9% lower for the week, after settling Thursday at the lowest since Dec. 21, 2021, according to Dow Jones Market Data.

February Brent crude
BRN00,
-1.00%

 
BRNG23,
-1.00%
,
the global benchmark, declined by 65 cents, or 0.9%, to $75.50 a barrel on ICE Futures Europe. It settled Thursday at lowest since Dec. 24 of last year and trades around 11.9% lower for the week.

Back on Nymex, January gasoline
RBF23,
-0.28%

shed 0.4% to $2.0401 a gallon, while January heating oil
HOF23,
-3.29%

traded at $2.781 a gallon, down 3.5%.

January natural gas was at $6.153 per million British thermal units, up 3.2%, trading 1.9% lower for the week.

Market drivers

Oil fell sharply this week as both the Group of Seven price cap and European Union embargo on Russian seaborne crude, which took effect on Monday, as well as the China economic reopening story, “fulfilled their end of the buy-the-rumor-sell-the-fact trade,” said Troy Vincent, senior market analyst at DTN.

This hit oil prices alongside the impact of a clearly slowing global economy, particularly in Europe and the U.S. where Energy Information Administration data increasingly reflect the “sharp slowdown in on-road freight and global trade moving into the holiday season,” said Vincent. “Weak U.S. gasoline and diesel demand is helping rebuild product inventories, bringing fuel prices lower and therefore limiting expectations for crude demand at refiners in the coming months.”

Oil prices had briefly moved higher Thursday on news of a pipeline shutdown late Wednesday, but finished that session at their lows of the year as pressure from oil demand worries outweighed support. Prices on Friday, also gave up early gains.

The Keystone pipeline, which carries oil from Canada to the Texas Gulf Coast remained shut due to a 14,000-barrel oil spill in Kansas, Reuters reported Friday.  

Independent energy expert Anas Alhajji, who’s also managing partner at Energy Outlook Advisors LLC, wrote on Friday that the pipeline shutdown is expected to lower inventories at Cushing, Okla., increase crude via rail from Canada, support WTI and Latin American crudes, and widen price differentials between WTI and Canadian crude.

“The impact of the shutdown on crude quality is more important than quantity,” he said.

Also see: Why coal leads the rise in commodities this year

Meanwhile, U.S. Labor Department data showed Friday that wholesale prices rose 0.3% in November. Economists polled by The Wall Street Journal has forecast a 0.2% gain. Although hotter than expected in November, inflation at the wholesale level is showing steady deceleration from the peak in March.

Separately Friday, the University of Michigan’s gauge of consumer sentiment rose to a preliminary December reading of 59.1 from a November reading of 56.8. Inflation expectations over the next year fell to 4.6% — the lowest since September 2021.

Still, the market is more focused on the U.S. consumer price inflation report due out Tuesday, the day before the Federal Reserve’s decision’s on interest rates. There have been concerns that if the Fed raises interest rates too quickly, that could lead the economy into a recession, and lower demand for crude.

Oil prices were also sharply lower for the week, with traders “concerned that good days are gone for oil prices, when there were serious concerns about oil supply,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update. “It seems like there is more than ample supply and the lawmakers in the United States are still encouraging oil drillers to pump as much oil as they can.”

Even so, major oil producers OPEC+ reduced their crude output by 700,000 barrels per day in November — the steepest monthly decrease since April, according to the latest Platts survey by S&P Global Commodity Insights released Friday.

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