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Bloomberg
Oil dropped alongside other financial assets and commodities as crude’s sizzling rally ran out of steam after hitting a seven-year high.
Futures in New York slumped more than 3%, before paring losses to trade near $84 a barrel, following a decline in stocks and raw materials including copper. Crude has posted a gain of more than 10% so far this year, despite weakness in stock markets as monetary policy tightens.
Though crude was pressured on Friday, much of Wall Street has been growing steadily more bullish on prices. Morgan Stanley joined Goldman Sachs Group Inc. in forecasting $100 oil later this year, although Citigroup Inc. cautioned that sticking to a bullish view could be dangerous after this quarter. The International Energy Agency this week said the oil market was looking tighter than previously thought, with demand proving resilient despite the rapid spread of the Omicron variant.
“Today the market is experiencing a small set back with the rest of commodity markets, but it is likely not more than consolidation after the recent rally,†said Jens Pedersen, senior analyst at Danske Bank A/S.
Crude’s bumper rally had pushed many of the main futures contracts into overbought territory on a technical basis. Brent, WTI and heating oil futures all moved out of that zone amid the sharp price pullback early Friday.
Still, the focus remains on how much further the Organisation of Petroleum Exporting Countries and its allies can lift output. Pavel Zavalny, head of the Russian Duma Energy Committee, said restoring output won’t be easy amid technical challenges and underinvestment.
Oil traders are turning their focus to a potential trade agreement between South Korea and some major Persian Gulf producers that may reduce prices of Middle Eastern crude in the months to come.
The premium on the nearest US diesel contract collapsed by the most since April 2020 as milder weather next month may reduce its demand for heating.
Investment in Canada’s oil and natural gas industry will rise 22% this year to $26.3 billion due to higher prices, according to the Canadian Association of Petroleum Producers.