“It seems the blood-letting ran its course and the market’s trying to catch its breath,” said Gene McGillian, broker and analyst at Tradition Energy.
Front-month U.S. benchmark crude-oil futures prices dropped $4.58 a barrel in the previous two days, ending Thursday at a new 2013 low. Prices barely staggered to their feet after the two-day pounding, in which commodity funds shed their expectations of near-term higher prices, helped by a large jump in U.S. crude-oil inventories.
Market anxieties may not let up next week as the March-delivery contracts for reformulated-gasoline and heating-oil futures expire at Thursday’s settlement and the March 1 deadline to break a government impasse and reach a deal to avoid $85 billion in automatic spending cuts looms. Failure to reach a deal likely would unnerve markets, traders said.
Light, sweet crude-oil futures for April delivery on the New York Mercantile Exchange settled 29 cents higher, at $93.13 a barrel. The contract fell 3.4%, the worst weekly performance for Nymex crude since Oct. 26, 2012.
April ICE Brent crude oil, which lost $3.99 over the previous two days, settled 51 cents higher Friday, at $114.10 a barrel. The contract lost 3% in the week, the biggest decline since the week ended Dec. 7, 2012.
Analysts at Goldman Sachs said oil prices are now “in line with fundamentals” after moving too high on “forward-looking survey data generating renewed optimism” on the global economy and oil-demand growth. The reality of “lackluster” hard data on actual demand and weak physical markets for oil brought about the selloff, the analysts said in a note.
Pressure on U.S. crude prices built when the Energy Information Administration reported domestic crude-oil stocks rose by 4.1 million barrels last week, more than twice the expected level. Stocks are now sufficient to meet nearly 27 days of current low demand from refiners, EIA data show. That is the highest level of inventory cover since March 1994, and crude-oil stocks outright are at their highest level for this time of year on EIA data beginning in 1982.
Andy Lebow, senior vice president for energy futures at Jefferies Bache, said U.S. crude now appears set to trade in a range of $90-$95 for the near term, down from the recent $95-$100 span.
Meantime, fireworks may surround the expiration of the March-delivery reformulated gasoline futures contract next week. The contract dropped 9.8 cents a gallon in the previous three days from a 20-week high, before recovering to settle 1.4% higher Friday.
Price volatility is common at this time of year as refiners walk a fine line between producing enough fuel to meet the winter-grade specification for the March contract before switching to the costlier, cleaner-burning summer-grade fuel that meets the April contract specifications.
In the last four trading days of the March 2012 contract, RBOB futures, then at a seven-month high, fell 11.05 cents, or 3.5%.
March-delivery RBOB futures rose 4.31 cents a gallon Friday, to settle at $3.0796 a gallon.
March-delivery heating oil futures, which shed 12.8 cents over the previous four sessions, settled 0.85 cent higher, at $3.1042 a gallon.
*David Bird, Dow Jones Newswires