Oil futures dipped for the second day in a row on Friday after reaching more than seven-year highs earlier in the week. The drop comes after a surge in crude inventories in the United States and a stock market selloff, both of which have weighed on the general mood.
In a daily statement, Robbie Fraser, global research & analytics manager at Schneider Electric, stated prices reversed a “significant amount of a three-day surge to start the week.” As March took over as the front-month at the end of Thursday’s session, the price of West Texas Intermediate oil “gapped lower,” he said.
“The key pricing factors are projected to persist” in the coming week, he said. “Demand resiliency continues to provide support, especially in the face of the omicron variation at a period when crude demand is generally at its lowest.”
WTI crude for delivery in March On the New York Mercantile Exchange, CL00, -0.56 percent CLH22, -0.56 percent lost 61 cents, or 0.7 percent, to $84.94 a barrel, bringing the U.S. benchmark’s weekly gain to 2%, according to FactSet.
March Brent crude BRN00, -0.66% BRNH22, -0.66%, the global benchmark, was off 70 cents, or 0.8%, at $87.68 a barrel on ICE Futures Europe, headed for a 1.8% weekly gain.
The drop on Friday came after a string of more minor losses. On Thursday, the Energy Information Administration announced that U.S. oil stocks, excluding the SPR, unexpectedly increased by 500,000 barrels for the week ended Jan. 14. The EIA also reported a 5.9 million barrel weekly increase in gasoline inventories, while distillate inventories declined by 1.4 million barrels.
Crude prices had recently only reacted to news that bolstered higher costs, such as brief supply disruptions that had already been remedied. The question is whether the correction will continue or if market participants will see the lower price level as a buying opportunity.