Oil declined on Friday, but still posted a weekly gain as traders weighed the prospects of higher demand this winter against the potential for Iranian supply to return.
West Texas Intermediate for September delivery ended the week 3.46 percent higher after losing 2 percent on Friday to close at US$92.09 a barrel.
Brent Crude for September delivery dropped 1.46 percent to US$98.15 a barrel, up 3.4 percent from a week earlier.
Photo: Reuters
Iran said it could accept a EU-brokered nuclear deal if it receives certain guarantees. The prospect of more oil supply wiped out all gains earlier in the session.
Crude has been whipsawed by a flurry of bearish and bullish headlines in the past few days, but cooling inflation that might ease the pace of interest-rate hikes by the US Federal Reserve has supported commodities broadly.
“My view is we move higher,” CIBC Private Wealth Management senior energy trader Rebecca Babin said.
“Demand numbers in the US were better and we have priced in a lot of negative demand adjustments into the market at this point,” she added.
The International Energy Agency this week raised its forecast for global demand growth, which has supported prices. On the other hand, OPEC expects the global market to tip into a surplus this quarter, and trimmed forecasts for the amount of crude it would need to pump.
While many analysts and traders believe the prospect of an Iran nuclear deal has not yet been priced into the market, the likelihood of an agreement is increasing.
The US and Iran have made enough incremental progress for a shift in the base case expectations for the timing of a deal from the first quarter of next year to the fourth quarter of this year, Rapidan Energy Group said in a note.
“The oil balance will be close to impossible to reliably predict,” given the array of wild cards in the market at the moment, PVM Oil Associates Ltd analyst Tamas Varga said.
Although prices have rallied this week, options markets are telling a different story. 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.
Additional reporting by staff writer
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