‘The Panic Selling Has Stopped’
By Christian Berthelsen
Oil futures eked out a gain for a second straight session on Friday, at least temporarily arresting the steep slide that has dragged U.S. and global crude benchmarks into bear-market territory over the last four months.
Front-month November futures for light sweet crude ended the day up 5 cents at $82.75 a barrel on the New York Mercantile Exchange. Prices were up more than 2% early in the session, but gains faded as the day wore on. Still, the U.S. benchmark lost more than 3% on the week as members of the Organization of the Petroleum Exporting Countries appeared poised to maintain export levels and compete for market share rather than cut production to shore up prices amid an abundance of oil.
The global Brent benchmark rose 57 cents, or 0.7%, at $86.16 a barrel on the ICE Futures Europe exchange. Brent futures are also in bear-market territory and lost 4.9% this week.
Analysts said a range of factors contributed support to the market Friday, including positive economic data, dovish central bank comments and a bullish research note from Goldman Sachs , as well as indications of a pickup in physical demand now that prices have dropped so sharply.
“I think we have seen a peak in downside momentum,” Citigroup Inc. analyst Tim Evans said. “We have probably seen a peak in the fear of demand weakness and the fear that OPEC may just stand back and let it drop. At this point I think the feel of panic over that possibility has probably eased.”
U.S. consumer sentiment and housing starts data came in better than expected, and European central bankers made remarks interpreted as eager to spur economic reforms and jump-start growth. In addition, there were indications that physical buyers such as China, the world’s second-largest oil consumer behind the U.S., were increasing purchases, and other bargain-hunting and book-squaring ahead of the weekend and next week’s Nymex front-month contract expiration shored up the market.
In a research note issued early Friday, Goldman Sachs said crude’s selloff has been driven by investor positioning based on expectations rather than a real-world imbalance between supply and demand, and that if prices got low enough they could spur renewed demand and consumption. “Prices have likely overshot to the downside,” the bank said.
Still, some analysts questioned how long the stasis might last, pointing to indications that certain OPEC members may continue high levels of exports rather than scale back to support prices in a continuing battle for market share. Even Goldman Sachs noted it remains bearish in the longer term on the market, as U.S. oil production continues to flood markets.
In product markets, November gasoline futures gained 2.18 cents, or 1%, to settle at $2.2327 a gallon. November diesel futures rose 2.73 cents, or 1.1%, to $3.4976 a gallon.
Write to Christian Berthelsen at firstname.lastname@example.org