Oil Futures Settle Lower Friday

WASHINGTON (DTN) -- Following choppy back-and-forth trading for most of the session, New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled lower Friday, with West Texas Intermediate registering a 3% weekly loss. This week's declines were mostly driven by an apparent reversal in U.S. policy regarding Iran that could lead to an easing of U.S. sanctions on Iranian crude exports, reigniting fears of global oversupply.

NYMEX October WTI futures gave back $0.24 to settle at $54.85 per barrel (bbl) after reaching a $57.85-per-bbl seven-week high on the spot continuous chart earlier in the week. ICE November Brent contract dipped $0.16 Friday while down 2.1% on the week with a $60.22 bbl settlement, falling from a $63.78 bbl multi-week high reached Tuesday. NYMEX October ULSD futures eased 0.73 cent to settle at $1.8778 gallon, while shedding 1.2% on the week. NYMEX October RBOB contract ended flat at a $1.5531 gallon settlement, while posting a 1.3% decline on week.

Oil futures reversed sharply lower this week following the departure of National Security Adviser John Bolton, who was seen as a foreign policy hawk and a chief architect of sanctions against the Islamic Republic of Iran. Markets sold off hard on the prospect of an abrupt end to U.S. restrictions on purchases of Iranian crude oil that pressed its crude exports to below 200,000 barrels per day (bpd) from 2.5 million bpd in May 2018. S&P Platts estimates Iranian tankers are currently holding nearly 50 million bbl of oil at sea, the most since early January 2016.

Several analysts noted oil prices could easily freefall to the sub-$40-per-bbl range if Iranian barrels find their way back into the global market.

The Organization of the Petroleum Exporting Countries and allies offered no signs of making additional cuts in their output agreement this year during a technical meeting in Abu Dhabi on Thursday. Saudi Arabia's new energy minister, Prince Abdulaziz Bin-Salman, offered hope for bulls in the oil market, with his appointment spurring speculation of a change in Saudi strategy toward managing oil markets and possibly deeper production cuts. However, Thursday's highly anticipated Joint Ministerial Monitoring Committee meeting lacked tough language and clear signals on what the OPEC's strategy would look like in the coming months if Iran's sanctions are removed.

A large crude draw reported midweek by government data was disregarded amid concern over the potential for higher Iranian exports, with WTI futures range bound between $50 and $58 per bbl, where they were largely stuck for most of the summer.

EIA said domestic crude oil supplies fell for the fourth week in a row through Sept. 6, pressing stocks to 2% below the five-year average. U.S. production rate remained unchanged at 12.4 million bpd last week, which also correlates with continued decline in the number of active oil rigs, down five to a better-than-22-month low at 733 this week. Baker Hughes reported on Friday domestic oil producers removed 60 rigs from service in the third quarter and U.S. oil rig count is down 134 from year ago.

University of Michigan reported midmorning that their Consumer Sentiment Index rebounded from a three-year low to 92 in early September, still the third-lowest level since the 2016 U.S. presidential election. The gains in consumer sentiment are mostly attributed to expectations the central bank will lower interest rates when the Federal Open Market Committee meets next Tuesday and Wednesday, Sept. 17-18.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.