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Futures Movers: Oil ends lower on demand concerns, but prices score a gain on the week

Futures Movers

OPEC+ committee meets Monday

Mario Tama/Getty Images

Oil futures slipped a bit on Friday as rising COVID-19 cases in the U.S. and Europe heightened worries about demand for crude, but prices finished higher for the week, partly due to assurances from OPEC+ that it remains committed to production cuts.

The Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, seem “to have comforted markets that they are leading the oil market to balance,” said Edward Moya, senior market analyst at Oanda, in a market update.

Oil prices found support for the week after Saudi Arabia and Russia reportedly reiterated their commitment to the OPEC+ production cut agreement.

That raised expectations that “the alliance might take further action to either address some of its members’ undercompliance or re-evaluate its plan to boost production again from January,” said Paola Rodriguez-Masiu, senior oil markets analyst at Rystad Energy. “If these hopes prove futile then prices may be in danger again next week after the OPEC+ meeting.”

The Joint OPEC-Non-OPEC Ministerial Monitoring Committee, or JMMC, which monitors compliance with production cuts, is scheduled to meet on Monday.

West Texas Intermediate crude for November delivery
fell 8 cents, or 0.2%, to $40.88 a barrel on the New York Mercantile Exchange. Prices for the front-month contract, which expires at Tuesday’s settlement, posted a weekly rise of 0.7%.

Read: Here’s how the U.S. presidential election could shake up the oil market

December Brent crude
the global benchmark, lost 23 cents, or 0.5%, to $42.93 a barrel on ICE Futures Europe. Brent saw a 0.2% weekly climb.

Moya warned, however, that “Libya’s oil production revival might complicate the supply side narrative.”

Bloomberg reported Thursday that Libya’s output has climbed to around 500,000 barrels per day, after the reopening of facilities last month that had been shutdown since January due to a blockade related to the civil war.

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Meanwhile, “the market is worried about how the increasing lockdown measures in Europe will affect demand,” said Marshall Gittler, head of investment research at BDSwiss Group, in a note. “Mobility data suggests that travel has only recovered to 60% of its pre-pandemic levels in Europe, and it’s about to get a new hit as several European countries restrict gatherings again.”

In the U.S., data released Friday revealed that industrial production fell for the first time in five moves, down 0.6% in September, surprising economists who expected more steady growth.

“The not-too distant memory of negative oil prices still stings traders across the space as the threat of another supply chain crunch would rise exponentially with expectations of new lockdown measures being imposed in the U.S.,” analysts wrote in the latest newsletter from Sevens Report Research. Still, “more widespread lockdowns do remain rather unlikely.”

Looking to the OPEC+ committee meeting, Rystad’s Rodriguez-Masiu said “we expect on Monday’s meeting some strong words on compensating for the undercompliance” by some oil producers. “What everybody is wondering is if there will be any action against the laggards this time or if the bashing will stay at a verbal level.”

Prices showed little reaction Friday to data from Baker Hughes
showing a fourth straight weekly increase in the active U.S. oil-rig count. The number of active U.S. rigs drilling for oil rose by 12 to 205 this week.

Oil fell sharply during Wednesday’s session, but ended the day with small losses. Crude bounced after a round of weekly inventory data from the Energy Information Administration that showed a larger-than-expected fall in U.S. crude supplies, as well as a declines in gasoline inventories and a much larger than expected drop in distillate stocks.

On Nymex Friday, November gasoline
settled at $1.1688 a gallon, down nearly 1%, with front-month prices logging a weekly loss of around 2.9%, while November heating oil
lost 0.8% to $1.1791 a gallon, ending 1.1% lower for the week.

November natural gas
shed less than 0.1% to $2.773 per million British thermal units, for a weekly rise of 1.2%. The EIA on Thursday reported a smaller-than-expected weekly climb in U.S. natural-gas supplies.

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