Oil prices post third weekly drop after volatile week
NEW YORK (Reuters) – Oil prices fell, wiping out gains from the previous session, on worries that the US Federal Reserve will accelerate plans to boost interest rates to tame inflation.
Brent crude futures fell 70 cents, or 0.8%, to settle at $82.17 a barrel. US West Texas Intermediate (WTI) crude fell 80 cents, or 1%, to settle at $80.79 a barrel.
Both benchmarks fell for a third consecutive week, hit by a strengthening dollar and speculation that President Joe Biden's administration might release oil from the US Strategic Petroleum Reserve to cool prices. On a weekly basis, Brent fell 0.7%, while WTI declined 0.6%.
"This week has been a good reminder for oil markets that prices are not only affected by the supply-demand trajectory, but also from monetary policy forecasts and by forms of government intervention," said Louise Dickson, senior oil markets analyst at Rystad Energy. "Higher interest rates would provide even further support to the dollar and even more downward pressure on oil prices."
US Energy Secretary Jennifer Granholm said that Biden could act as soon as this week to address soaring gasoline prices.
"We believe that whatever the announcement is will only have a short-term impact on price, but because of the uncertainty the market is pulling back a little bit," said Phil Flynn, senior analyst at Price Futures Group.
US energy firms this week added oil and natural gas rigs for a third week in a row. The oil and gas rig count, an early indicator of future output, rose six to 556 in the week to Nov. 12, its highest level since April 2020, energy services firm Baker Hughes Co said.
Russia's Rosneft the world's second-biggest oil company by output after Saudi Aramco, warned of a potential "super cycle" in global energy markets, raising the prospect of even higher prices as demand outstrips supply.
Still, though there are positive signs on the demand side, with air travel picking up rapidly, tighter monetary and fiscal policy and the looming Northern Hemisphere winter will act as a dampener.
The Organization of the Petroleum Exporting Countries (OPEC) on Thursday cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month's forecast as high energy prices hampered economic recovery from the COVID-19 pandemic.
OPEC, Russia and allies, together known as OPEC+, agreed last week to stick to plans to add 400,000 bpd to the market each month.
"The oil market is sleepwalking into a supply surplus," said Stephen Brennock of oil broker PVM. "OPEC and its allies will at the very least need to put a pause on the easing of their supply curbs in the new year. Inaction will result in global oil stocks swelling once again."
