Oil prices fell heavily Friday on profit-taking, losing nearly all of the previous session’s sizeable gains.
However, the market netted gains for the week amid hopes of an OPEC-Russia deal to tackle a supply glut later this month.
US benchmark West Texas Intermediate (WTI) for delivery next month slid US$1.74 to US$45.88 a barrel compared with Thursday.
Brent North Sea crude for November delivery tumbled US$1.98 to US$48.01 a barrel.
Both main contracts had soared more than US$2 on Thursday and Brent briefly went above US$50 a barrel after the US Department of Energy said the nation’s commercial crude inventories slumped by 14.5 million barrels, the sharpest weekly drop in 17 years.
However, analysts said the market quickly realized the fall was a one-off move caused by import cutbacks, as Hurricane Hermine plowed through the Gulf of Mexico and up the east coast, rather than a sign of stronger consumption. Most felt that stocks were likely to rebound quickly.
“The reason behind the enormous drawdown is transitory, and does not influence the demand-supply situation of the oil market,” IG market strategist Bernard Aw said. “One week’s worth of data does not make a trend.”
Even so, oil prices on Friday were up from a week ago, WTI by 3.2 percent and Brent 2.5 percent, amid rising expectations that OPEC producers and Russia would try to strengthen the market perhaps with a production cap in a meeting in Algiers later this month.
In a client note on Friday, Morgan Stanley said that the market might suffer weakness from oversupply going into 2018.
For one, it said that supply could increase as producers in the US, Iraq, Iran, Nigeria and Libya all have room and desire to raise output.
“Producers are adapting to sustained low prices, limiting declines and beginning to invest again,” it said.
“As long as the market remains oversupplied, we would expect oil to remain in a similar US$35-55 trading range as it has most of this year,” it said.
Meanwhile, central bankers are putting gold investors and traders on the defensive.
More than 2,500 lots exchanged hands on Friday for a put option giving owners the right to sell October futures at US$1,300 an ounce (0.3 liter), making it the most-traded option for the second straight day.
The most active contract on the Comex slipped as much as 0.6 percent to US$1,334.10. Holdings in exchange-traded funds backed by gold fell for a second day on Thursday.
There is reason to be worried. US Federal Reserve Bank of Boston President Eric Rosengren, who shifted his stance in recent months in favor of monetary tightening, on Friday said that waiting too long to raise interest rates risks overheating the economy. Higher rates make bullion less competitive against interest-bearing assets. The comments come a day after the European Central Bank played down the prospect of an increase in asset purchases.
Gold futures for December delivery fell 0.5 percent to settle at US$1,334.50 an ounce at 1:44pm on the Comex in New York, marking the third straight loss, the worst streak since July 12.
Volume on the US$1,300 gold put options traded on the Comex more than doubled on Friday, after more than quadrupling a day earlier. Holdings in gold-backed ETFs fell by 3,132 ounces to 65.27 million ounces, data compiled by Bloomberg show.
In other metals, platinum and palladium futures fell on the New York Mercantile Exchange, while silver futures slipped on the Comex.
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