Oil Incurs Big Weekly Loss, But Traders Buoyed By Slowing U.S. Economy

Meanwhile, the U.S. oil rig count continues to decline: File Image/Pixabay

Oil on Friday logged its biggest weekly loss in 3 months, the result largely of a sudden turnaround in sentiment towards the prospect of the U.S. Federal Reserve cutting interest rates.

For the day, Brent settled down 71 cents to $82.96 per barrel, and West Texas Intermediate settled down 84 cents to $78.11 per barrel; for the week, Brent declined over 7 percent, and WTI incurred a drop of 6.8 percent.

The daily losses followed news that U.S. job growth slowed more than expected in April as did annual wage gains, which in turn caused traders to raise bets that the Fed will enact its first interest rate cut for 2024 in September.

Tim Snyder, economist at Matador Economics, said the data "gives a path forward for the Fed to have at least one rate cut this year."

It was a noteworthy reversal of sentiment, considering that earlier this week Phil Flynn, senior market analysts at Price Futures Group Inc., said traders are increasingly pricing in the prospect of the Fed raising interest rates again instead of maintaining them:  "You've got the stagflationary environment….the market is pricing in the Fed fears that they're going to come out a lot more hawkish."

Friday also saw a continuation of easing concerns over the Israel/ Hamas war, due to reports that Hamas was studying a proposal for a temporary cease-fire and planned to send a delegation to Egypt to continue negotiations.

For its part, Bloomberg summarized this week's oil trading by noting that "Gauges of the futures curve have weakened, indicating supplies are less tight, while options markets appear to have erased the war's risk premium….still, crude's nine-day relative strength index has been trading in overbought territory, which could signal the selloff was overdone."

In other oil news on Friday, data published by Baker Hughes showed that the total U.S. rig count fell by 8 to 605 this week, compared to 748 rigs this same time last year, and the number of oil rigs fell by 7 this week, after falling by 5 in the week prior.

Oil rigs now stand at 499, down by 89 compared to this time last year.

Also on Friday, Exxon Mobil Corporation finalized its acquisition of Pioneer Natural Resources for $60 billion, one of the largest oil-and-gas acquisitions in recent years that will boost Exxon's presence in the Permian Basin region of the U.S.

The acquisition gives Exxon access to over 1.4 million net acres in the Delaware and Midland basins, with potential for a surge in production as much as 1.3 million barrels per day.