Oil futures fell on Friday, after settling at a two-month high a day earlier, with U.S. prices ending the week with a modest loss.
The market saw “a bit of a pullback after the last two days” of gains for oil, said Phil Flynn, senior market analyst at Price Futures Group. Prices “hit resistance” when China’s President Xi Jinping said Friday that “he wanted some respect,” as that resurfaced worries about the lack of a trade deal, he told MarketWatch.
Xi said Beijing wants to work with the U.S. for a trade deal, but was not afraid to “fight back” to protect its own interests, according to the Associated Press .
Oil prices had found support early Friday on growing expectations the Organization of the Petroleum Exporting Countries and its allies will agree to extend production cuts when they meet next month.
West Texas Intermediate crude for January delivery /zigman2/quotes/209723574/delayed CLF20 -0.22% fell 81 cents, or 1.4%, to settle at$57.77 a barrel on the New York Mercantile Exchange, while January Brent crude , the global benchmark, lost 58 cents, or 0.9%, at $63.39 a barrel on ICE Futures Europe.
The front-month U.S. benchmark WTI contract ended 0.1% lower for the week, while Brent, the global benchmark, saw weekly gain of roughly 0.1% weekly gain. Both grades ended Thursday at their highest levels since Sept. 23.
Prices ultimately saw selling pressure by “traders who made handsome gains when stories of OPEC cut extensions first surfaced,” said Manish Raj, chief financial officer at Velandera Energy.
Oil’s earlier climb was in line with news reports this week indicating OPEC and its allies, particularly Russia, are expected to agree to extend existing output curbs of 1.2 million barrels a day, scheduled to end in March, through mid-2020, when they meet in Vienna in December.
“Now, amidst a lack of confirmation, or announcements from a credible source, price gains resulting from market rumors are being discounted as the market adapts a wait and watch approach,” said Raj.
Even so, “the trifecta effect of improved OPEC compliance, expectation of extension of cuts beyond March 2020 and slowing U.S. production growth indeed paints a bullish scenario for crude oil,” he said.
Providing a hint on the production outlook, Baker Hughes /zigman2/quotes/205323712/composite BKR +0.18% on Friday reported a fifth consecutive weekly decline in the U.S. oil-rig count. The number of active U.S. rigs drilling for oil fell by 3 to 671 this week.
Meanwhile, others argued that a mere extension of current curbs would fail to support the market amid what they see as signs of oversupply.
“Nothing has been decided as yet and negotiations tend to heat up closer to meeting time. OPEC+ could still make further production cuts; however the rhetoric from energy ministers, the OPEC secretary-general, Russian oil companies, et al, all point to maintaining the status quo,” said Jason Gammel, analyst at Jefferies. “We thus estimate that the market will be oversupplied by [900,000 barrels a day] in 1H20, which in turn skews risk to the downside on our 1H20 $58 a barrel Brent price forecast.”
In other energy trading, December gasoline fell 1.8% to $1.6743 a gallon, settling 2.4% higher for the week, while December heating oil edged down 0.8% to $1.9294 a gallon, for a weekly loss of about 1%.
December natural-gas futures jumped 3.8% to $2.665 per million British thermal units, paring its weekly loss to around 0.9%.