Friday Caps Week & Month of Heavy Losses for Crude Prices

Goldman Sachs insists there are several reasons to remain bullish on oil. File Image / Pixabay

With one notable exception from a respected bank whose outlook has been inconsistent of late, the analytical has largely abandoned its fear of a global crude shortage, and that, along with news that the U.S. will temporarily spare eight countries from Iran-related sanctions caused oil prices to drop once more on Friday to a 7 month low.

West Texas Intermediate ended Friday's session down 55 cents to $63.14 per barrel, a 6.6 percent fall for the week, while Brent sneaked up a minuscule 2 cents to $72.91 per barrel, a 6 percent fall for the week.

This comes on the heels of crude posting its biggest monthly drop (10.8 percent) for October since July on 2016.

Gene McGillian, director of market research at Tradition Energy, remarked, "It seems as though all the worries about tightening supplies due to he loss of Iranian barrels in the market have dried up, [and] on top of that, concerns regarding reduced global demand has also helped ... the market continues to search for a bottom."

Mark Scullion, futures and options broker at Eclipse International, added, "U.S. production up, Russian production up, OPEC [the Organization of the Petroleum Exporting Countries] production up, and now we have eight countries that are going to get waivers: even though we've had a whole month of lower oil prices, I'm still looking for a bit more downside."

For the record, the countries reportedly that can continue doing business with Iran include South Korea, Japan, India, and China.

Micheal Cohen, head of energy research at Barclays, was another expert who tried to distance himself from the up until recent analytical consensus that the crude market was due for a horrific tightening: he said, "in reality, the decline in exports from both Iran and Venezuela was more than offset by the increase in exports from other OPEC countries.

"Demand at $80 to $85 oil prices has started to slow, so overall we're looking at a balance for next year that actually flips back into surplus."

Marco Dunand, chief executive at Mercuria, said he wouldn't be surprised in the world's largest producers soon reverse their course of raising output and revert back to reduction: "If we start moving into the low $70s on Brent, I think some of those producers will start asking themselves whether they haven't overreacted to the earlier price rally and start considering balances."

However, a brave lone voice offered a different opnion on where the market is head: Jeff Currie, global head of commodities research at Goldman Sachs, told Bloomberg television that "oil and commodities are still the best performing asset class", and that one of three reasons his bank is bullish on crude is that the market is just now beginning to see the Iranian cuts begin to impact inventories, [and] inventories are beginning to tighten."

He went on to state that "Positioning in the market is very light, and the third reason is the overall demand picture still looks good."

Early in October, Currie complained that the crude price rally had gone too far too fast and predicted Brent will settle back into a range of $70 to $80 per barrel before the year ends; this prompted Bloomberg to note that the analyst and the bank he represents has made numerous about-faces in their crude forecasts of late.