Oil Posts Biggest Weekly Loss Since July as Mideast Risk Fades

Oil headed for its first weekly loss since November as the prospect of an open war in the Persian Gulf receded.

13 Jan 2020, 04:53 AM IST

Oil Posts Biggest Weekly Loss Since July as Mideast Risk Fades

A worker pours extracted crude oil into a bucket in the village (Photographer: Dimas Ardian/Bloomberg)

(Bloomberg) -- Oil ended the first full week of 2020 with the steepest loss since July as geopolitical threats to some of the world’s most important supplies fizzled.

Futures settled at a one-month low in New York on Friday to cap a volatile week that saw crude soar and then crash as the U.S. and Iran teetered on the brink of all-out conflict. Ultimately, prices finished the week down more than 6%.

“Prices are still sliding because of the easing in tensions in the Middle East,” said Michael Loewen, director of commodity strategy at Scotiabank. “That’s draining the supply risk premium that was injected into the market starting with the killing of the Iranian general.”

Against the backdrop of waning Middle East tensions, U.S. crude inventories expanded by 1.16 million barrels last week, confounding analysts and traders who’d expected a decline. With gasoline stockpiles at a 10-month high, supply concerns in the world’s biggest economy were assuaged.

West Texas Intermediate crude for February delivery settled down 52 cents to $59.04 a barrel on the New York Mercantile Exchange. Brent futures for March settlement declined 39 cents to $64.98 on the ICE Futures Europe exchange. The global benchmark lost more than 5% this week.

In addition to ample American supplies, members of the Organization of Petroleum Exporting Countries are sitting on huge amounts of spare capacity after cutting production for most of the past three years.

“Although the threat of outright war has receded, the industry remains on edge, expecting disruptions like shipping incidents or attacks on oil facilities on par with events last year,” Eurasia Group analysts Robert Johnston and Henning Gloystein said in a note.

Other oil-market news:
Gasoline futures rose 0.4% to $1.6596 a gallon. Oil drilling in U.S. fields dropped to the lowest in almost three years as sliding oil prices discouraged exploration. Shale oil drillers in the Rocky Mountains and U.S. Great Plains expect crude prices to remain too low to spur new drilling for more than a year, according to a survey by the Federal Reserve Bank of Kansas City. Mexico’s state oil company Petroleos Mexicanos is set to drill an exploratory well between January and March, according to a statement from the National Hydrocarbons Commission or CNH.

Other oil-market news:

Gasoline futures rose 0.4% to $1.6596 a gallon.
Oil drilling in U.S. fields dropped to the lowest in almost three years as sliding oil prices discouraged exploration.
Shale oil drillers in the Rocky Mountains and U.S. Great Plains expect crude prices to remain too low to spur new drilling for more than a year, according to a survey by the Federal Reserve Bank of Kansas City.
Mexico’s state oil company Petroleos Mexicanos is set to drill an exploratory well between January and March, according to a statement from the National Hydrocarbons Commission or CNH.

--With assistance from Sharon Cho.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net;Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Joe Carroll, Reg Gale