Oil Up For The Week But Down For The Month As Concerns Shift To Supply

Meanwhile, Bloomberg warns of a substantial oil market shift: File Image/Pixabay

More price gains for oil on Friday contributed to the commodity achieving a 9 percent gain for the week, driven by cooling bank concerns and growing worries about tight supplies globally.

Brent settled up $1.29, or 1.6 percent, at $79.89 per barrel, while West Texas Intermediate settled up $1.30, or 1.8 percent, at $75.67 per barrel.

However, near-panic earlier this month over global banking systems and other factors have taken their toll: Brent and WTI recorded monthly declines of 5 percent and 2 percent respectively, their steepest since November.

The daily and weekly gains were supported by news of inflation slowing, via the U.S. Personal Consumption Expenditure index (the Federal Reserve's preferred inflation gauge) rising just 0.3 percent in February compared with a 0.6 percent rise in January and analytical expectations of a 0.4 percent rise.

Investors also took notice of producers shutting or reducing output at oilfields in the Kurdistan region of northern Iraq, as part of a 450,000 barrels per day (bpd)  export halt from Iraq due to an arbitration decision.

Oil firms still operating in the region are moving product into storage, which experts say will reach capacity within days, as talks continue between Turkey, Baghdad and other sources.

When asked to forecast the short term, Craig Erlam, senior markets analyst at Oanda, said, "The prolonged economic scarring of the last month will likely slow the economy, if not cause a recession, and lower interest rate expectations are not enough to support oil prices."

Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association, told media that "While economic-dampening monetary policy will impact spending and tighten credit conditions, it will also affect available capital for oil and natural gas development that will take months to recover, resulting in a tighter supply outlook in the second quarter."

Addressing other short-term concerns, Alex Longley, oil trading reporter for Bloomberg, warned of a big change in the oil market with a revamp of the dated Brent benchmark, as more and more countries rely on U.S. oil as a mainstay of their diet.

He said, "With Dated Brent used in everything from long-term gas contracts to the crude selling prices of African countries, any big moves after the addition of West Texas Intermediate will have multibillion-dollar ramifications."

He went on to note that some pressure on Brent is expected, and "The first test will be later on Friday, when the expiry of the May Brent futures contract is settled, in part referencing derivatives for June — when delivery of U.S. cargoes will be allowed.

"But if the new Dated Brent tells us anything about the market, it's that oil from the U.S. is only getting more important."