"Rumour And Speculation" Cause Big Weekly Loss For Oil

Much faith is being placed on tentative Gaza talks: File Image/Pixabay

Oil prices on Friday took a dive, reflective of ongoing economic growth challenges in China as well as a waning of concerns about the Israel/Hamas conflict.

With trading now firmly informed by sentiment, investors on Friday were less swayed by news from Washington that the U.S. added 353,000 jobs in January, contributing to an unemployment rate of just 3.7 percent and further demonstrating that the country's economy seems impervious to the highest interest rates in 20 years.

Brent settled down $1.37 at $77.33 per barrel, while West Texas Intermediate settled down $1.54 at $72.28 per barrel.

Oil was headed toward a weekly drop of about 7 percent, causing Saxo Bank to state, "Crude oil suffered its biggest loss since November with the risk premium deflating amid talks for Gaza ceasefire." 

Michael Kern, editor at Oilprice.com, was more direct in his market assessment: he said, "Rumours and speculation appear to be driving oil markets this week, adding to volatility."

Traders seemed appeased by initial talks to pause hostilities and release hostages of the Israel/Hamas conflict, even though critics warn that such a pause may simply give aggressors time to regroup.

Kern added, "On the fundamental side, with OPEC+ rolling over its policy and refusing to change its pre-set course, unforeseen refinery outages in the United States might have an even more lasting impact on prices by weakening U.S. demand even further."

Bloomberg noted that "Headlines on the talks and oil's drop below its 200-day and 50-day moving averages triggered trend-following algorithms, exacerbating the decline."

The news agency also pointed out on Friday that WTI's prompt spread flipped as much as 5 cents into contango, a bearish structure that shows weakening demand for near-term barrels.

In other oil news on Friday, TotalEnergies' 238,000 barrel per day (bpd) refinery in Port Arthur, Texas, restarted after being closed since mid-January due to a power outage; also, BP's Whiting refinery said power had been restored to its 440,000 bpd refinery in Indiana after a day-long outage, but no word was given on when production will resume.