Worst Weekly Drop For Oil In 11 Months As Bearish Sentiment Hijacks Crude Market

Citigroup Inc. thinks Brent could dip to the $60s next year: File Image/Pixabay

Thursday's gain in oil prices proved to be a blip amid an otherwise chronically bearish market for the commodity, as Friday saw investors causing a 2 percent-plus drop in crude after the U.S. posted weak jobs data.

Brent settled down $1.63, or 2.24 percent, to $71.06 per barrel, while West Texas Intermediate settled down $1.48, or 2.14 percent, to $67.67; for the week, Brent declined a dismal 10 percent, while WTI dropped by 8 percent (the biggest weekly drop in 11 months).

Friday's concerns focused on U.S. government data showing that employment increased less than expected last month; and analysts feared that a 4.2 percent drop in the jobless rate would jeopardise any chance of the U.S. Federal Reserve making a substantial interest rate cut this month, even though the Fed has never indicated anything but a modest cut, if that.

The bearish sentiment is persistent to say the least, and prevails despite U.S. crude stockpiles falling by 6.9 million barrels to 418.3 million barrels last week (a strong indicator of demand and far more than an expected decline of 993,000 barrels).

Sentiment has also been impervious to seemingly positive developments such as the Organization of the Petroleum Exporting Countries (OPEC) making the decision to delay plans to unwind its production cuts next month and in November, which Jeffries said would be enough to prevent stockpile builds even if demand from China didn't improve.

Rebecca Babin, senior energy trader at CIBC Private Wealth, said, "The market is still on tenterhooks evaluating the strength of the global economy and what the Fed will do."

Meanwhile, Citigroup Inc. analysts including Eric Lee wrote in a note, "We see the OPEC+ unwind delay, ongoing geopolitics and financial positioning providing price support at $70 to $72 Brent," and added that it sees "moves down to the $60 range in 2025 as a sizable market surplus emerges."

In other oil news on Friday and according to a freshly-issued price list, Saudi Arabia's state-run Saudi Aramco cut its October pricing for its Arab Light crude oil for Asian buyers by 70 cents to the lowest levels in three years, with ongoing weak economic data from data from China cited as the impetus.

Aramco also lowered the price of Arab Light to Europe and the U.S.