Oil Prices Fall, Follow Stocks Lower as Dollar Climbs

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December 14, 2018 1:42pm NYSE:USO

Oil Prices

From Myra P. Saefong & Rachel Koning Beals: Oil prices fell on Friday, headed for a loss on the week, as a stronger dollar cut global demand for U.S.-priced commodities and a slide for the stock market sullied the risk-taking mood.

Oil prices rose sharply late Thursday as traders contemplated data showing a blip higher in monthly OPEC output even as future cuts loom, as well as a recent report of a weekly decline in U.S. crude supplies and production. Gains picked up after a news report said Saudi Arabia plans to cut shipments to U.S. refiners to avoid an expansion of U.S. stockpiles.

In Friday dealings, West Texas Intermediate crude for January deliveryCLF9, -2.38% fell 84 cents, or 1.6%, at $51.74 a barrel on the New York Mercantile Exchange. The contract was down 1.6% for the week but has gained 1.6% for the month so far.

The week’s seesaw moves, up one day and down the next, has led to relative stability in WTI oil after the 30% plunge by late November from four-year highs in early October.

“The threat of an immediate breakdown has receded on oil as the market has formed a consolidation between the low at $49.40 and resistance at $54.55 in the past few weeks,” said Richard Perry, analyst with Hantec Markets. “This consolidation has also now broken the nine-week downtrend. Support is growing in the range $50 to $50.50.”

Global benchmark February Brent crude LCOG9, -1.89%  fell 54 cents, or 0.9%, at $60.91 a barrel on ICE Futures Europe, down about 1.2% for the week.

U.S. stocks traded lower as signs of China’s economic slowing hit equities and raised fresh concerns about the economic giant’s thirst for oil moving forward. The U.S. Dollar Index DXY, +0.40% meanwhile, rose 0.6%, as growth worries and geopolitical jitters sparked haven-related flows.

In its closely watched monthly oil market report, the International Energy Agency said Thursday that crude output by OPEC rose by 100,000 barrels a day on month to reach 33.03 million barrels a day in November. Saudi Arabia — the de facto head of OPEC — churned out 410,000 barrels a day to a historic high of 11.06 million barrels a day.

But the agency’s report stands in contrast to OPEC’s own monthly oil market report, which was released Wednesday and showed a slight decline in the cartel’s November output despite ballooning Saudi production.

Both reports come less than a week after OPEC agreed with its nonmember partner producers — led by Russia — to collectively cut crude output by 1.2 million barrels a day starting in January. OPEC is slated to curb production by 800,000 barrels a day, while Russia and nine allied producers will shoulder the remainder of the cuts.

Saudi Arabia’s reported plan to cut shipments to U.S. refiners “shows the Saudis are very serious about balancing the market,” said James Williams, energy economist at WTRG Economics. “They want stocks (supplies) down to the 5-year average for the [Organization for Economic Cooperation and Development] countries.”

“Putting more emphasis on the U.S. makes sense because the U.S. reports its data weekly and it will move the market faster than other countries,” he said.

Baker Hughes releases weekly data later Friday on the number of rigs drilling for oil in the U.S., a key barometer for activity in the sector.

Back on Nymex, January gasoline RBF9, -2.75%  fell 2.3% to $1.445 a gallon, trading down 2.8% for the week. January heating oil HOF9, -1.31%  fell 1% to $1.857 a gallon, with prices looking at a weekly decline of 1.6%.

Meanwhile, natural-gas prices saw a hefty decline Friday. January natural gasNGF19, -6.89%  dropped 5.4% to $3.903 per million British thermal units, poised to suffer a weekly drop of 13%.

“Rising temperatures in [natural-gas] consuming regions and a smaller than expected weekly inventory drawdown announced [Thursday] suggest that fears of a supply crunch this winter may be starting to ease, possibly leading some traders to take profits,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

The EIA on Thursday reported that domestic supplies of natural gas fell by 77 billion cubic feet for the week ended Dec. 7. Analysts polled by S&P Global Platts forecast a decline of 79 billion.

The United States Oil Fund LP (USO) was trading at $10.88 per share on Friday afternoon, down $0.33 (-2.94%). Year-to-date, USO has declined -9.41%, versus a -1.44% rise in the benchmark S&P 500 index during the same period.

USO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 ETFs in the Commodity ETFs category.

This article is brought to you courtesy of MarketWatch.

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