Futures Trading: Oil Prices to Hit Weekly Trough
FUTURES TRADING – Oil prices managed to bounce up around 1% on Friday. However, they were still on their way to their biggest weekly drop this year.
Earlier this week, oil prices slipped due to a surge in inventories and economic slowdown anxiety.
Brent crude futures gained 1.1% and stood at $68.48 a barrel, or 72 cents higher than the last close. Prices have so far been supported by cuts that the Organization of Petroleum Exporting Countries leads and Middle East tensions.
Meanwhile, US West Texas Intermediate (WTI) crude futures gained 1.1 % at $58.57 a barrel, or 66 cents higher.
“Multiple supply risks remain, as tension continues between Iran and the US, which could turn disruptive,” said ANZ bank.
The forward price curve for Brent crude futures is still in backwardation. This means that prices for on-demand delivery are higher than for later deliveries.
This in turn implies tight market conditions, compelling producers to produce and sell oil immediately instead of storing it for later.
“Despite the big declines in the Brent flat price, the backwardation in the forward curve steepened this week,” said Jefferies Bank.
Supply Cuts and Tensions
The OPEC has led supply cuts since the beginning of the year. Their goal was so tighten the market and prop up prices.
ANZ said that US sanctions on Iran and Venezuela would most likely cut down the crude exports from OPEC. Iran and Venezuela are both members of the oil cartel.
However, the firmer prices of Friday could not pare the bigger declines recorded earlier in the week, which have dampened crude futures. This has placed them on track for their biggest weekly losses in the year.
“Brent prices are down…this week as US-China trade concerns are dominating the headlines,” said Jefferies Bank.
The surging amount of oil inventories in the US started putting pressure on prices starting from the middle of the week.
“Increasing (oil) inventories and slumping US manufacturing activity exacerbated trade related concerns about global demand,” said an Australian market strategist.
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