Oil Posts Second Straight Weekly Loss As Mixed Messages Emerge From Russia/Ukraine Talks

An under-performing OPEC also worried crude traders: File Image/Pixabay

Crude on Friday posted its second consecutive weekly decline, with conflicting news emerging from the Russia/Ukraine peace talks causing confusion and substantial volatility, along with Russian crude treated cautiously by buyers fearful about damage to their reputations.

Brent on Friday settled up $1.29, or 1.2 percent, to $107.93 per barrel, while West Texas Intermediate settled up $1.72, or 1.7 percent, at $104.70 per barrel; both benchmarks ended the week down around 4 percent after trading in a $16 range.

Additionally, the International Energy Agency on Friday warned that oil markets are in an "emergency situation" that could worsen; this followed the IEA's warning earlier this week that problems resulting from the loss of Russian oil exports due to sanctions "cannot be understated."

The familiar but elusive solution to the turmoil was reiterated by Rob Thummel, portfolio manager at Tortoise: "Until we get some resolution on what Russia's ultimate goal here is, you're going to have a lot of sentiment and a lot of volatility in oil prices."

However, while some signs of progress had emerged earlier this week, Russia said an agreement had yet to be reached after four days of talks (among the many demands of the former Soviet Union is assurance that Ukraine will never join NATO and a promise that it will radically downsize its armed forces).

Sentiment-driven traders weren't helped on Friday by reports from sources close to the matter that output from the Organization of the Petroleum Exporting Countries (OPEC) in February undershot targets even more than in the previous month, thus presumably exacerbating global tightness.

For its part, Morgan Stanley analysts Martijn Rats and Amy Sergeant boosted their forecast for third-quarter Brent prices by $20 to $120 per barrel, and they stated in a note, "To say that oil prices have been volatile recently would be an understatement."

Still, news on Friday that could be construed as positive came in the form of Russia backing down on demands that halted the Iran nuclear deal talks; this reopens the way to an agreement, which in turn would see Iranian oil coming to the market at a time when energy supply shortages have brought prices to their highest in over a decade.