Oil Logs More Weekly Losses As Bearish Sentiment Plumbs New Depths

Even rising Middle East tensions proved imperious to the gloom: File Image/Pixabay

Unsurprisingly given a tumultuous week of losses, oil prices on Friday logged another round of weekly declines, as a persistent bearish attitude driven by perceptions of lower global demand and rising production proved impervious to a variety of positive factors.

However, while Brent settled down around 3 percent for the week and West Texas Intermediate fell by around 5 percent, both benchmarks logged modest gains on Friday: up 38 cents to $71.89 for Brent, and up 51 cents to $68.18 for WTI.

The hopeful elements that failed to sway traders (at least not for very long) included the U.S. Federal Reserve lowering its interest rate and promising further cuts; substantial stock draws for the U.S. (usually an indicator of strong demand); and China's central bank on Friday lowering its interest rates and injecting liquidity into the banking system in a bid to pull economic growth back toward the 2024 target of about 5 percent.

Analysts at Aegis Hedging stated in a note on Friday, "Despite aggressive Chinese stimulus, concerns of oversupply from OPEC's plan to bring production back have pushed prices lower" – a reference to the Financial Times disclosing in the previous session that Saudi Arabia is giving up its $100 per barrelprice target in preparation for raising output, along with Organization of the Petroleum Exporting Countries (OPEC) members and allies in December.

Sources with knowledge of the matter said Saudi officials are ready to increase production in December by 180,000 barrels per day (bpd) monthly, even if the move results in a prolonged period of low oil prices.

Some analysts on Friday expressed surprise that oil didn't achieve higher daily gains, considering conflict in the Middle East escalated with Israel launching an airstrike in Beirut targeting Hezbollah leader Hassan Nasrallah.

Dan Yergin, vice chairman of S&P Global, told CNBC, "It is amazing to see that … war doesn't affect the price, and that's because there's been no disruption…there's still over 5 million bpd of shut in capacity in the Middle East."

Bloomberg analysts postulated that oil's chronic bearishness proves that the market is increasingly run by algorithms: "There have been at least three instances in the past two months alone where these algorithm-driven traders were credited with having exacerbated moves in both directions, leading to prices whipsawing."

Macquarie analysts wrote in a note, "We remain structurally bearish, but there is discomfort that bearish views are now unanimous."