Oil fell on Friday but was still on course for a weekly gain as traders weighed the prospects of higher demand this winter against the potential for extra supply from Iran.
West Texas Intermediate traded near $93 a barrel, wiping out an earlier increase after Iran said it can accept a European Union-brokered nuclear deal if it gets certain guarantees – something the country has been seeking for much of the last year.
Oil has been buffeted by a flurry of headlines in recent days and is still up more than 4 per cent this week. Six oil and gas fields in the Gulf of Mexico were shut after a leak at a Louisiana booster station halted two pipelines, though should soon resume. The International Energy Agency boosted its forecast for global demand growth as soaring natural gas prices and heat waves spur demand,
Other asset classes have also been on a firmer footing this week after US inflation figures missed expectations, potentially cooling the pace of interest rate hikes by the Federal Reserve.
“It appears that oil is attached to equities, and that it will follow the sentiment in the stock market in the immediate future,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. “The oil balance will be close to impossible to reliably predict,” given the array of wildcards in the market at the moment, he added.
- WTI for September delivery fell 1.5 per cent to $92.91 a barrel at 7:27 a.m. in New York.
- Brent for October settlement shed 1.2 per cent to $98.44 a barrel.
Though prices have rallied this week, options markets are telling a different story. There traders are paying the biggest premium for bearish put options over bullish calls since February. That gauge – known as the put skew – has grown steadily since concerns about the strength of the global economy have intensified.
In contrast to the view from the IEA, the Organization of Petroleum Exporting Countries struck a more pessimistic tone. The global oil market is expected to tip into a surplus this quarter, the group said in its monthly outlook on Thursday, trimming its forecasts for the amount of crude it will need to pump.
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