Oil prices fell on Friday, wiping out gains from the previous session. Image Credit: Reuters

New York: Oil prices fell on Friday, wiping out gains from the previous session, on worries that the US Federal Reserve will accelerate plans to boost interest rates to tame inflation.

Brent crude futures fell 70 cents, or 0.8 per cent, to settle at $82.17 a barrel. U.S. West Texas Intermediate (WTI) crude fell 80 cents, or 1 per cent, to settle at $80.79 a barrel.

Both benchmarks fell for a third consecutive week, hit by a strengthening dollar and speculation that President Joe Biden’s administration might release oil from the US Strategic Petroleum Reserve to cool prices. On a weekly basis, Brent fell 0.7%, while WTI declined 0.6%.

“This week has been a good reminder for oil markets that prices are not only affected by the supply-demand trajectory, but also from monetary policy forecasts and by forms of government intervention,” said Louise Dickson, senior oil markets analyst at Rystad Energy. “Higher interest rates would provide even further support to the dollar and even more downward pressure on oil prices.” US Energy Secretary Jennifer Granholm said on Monday that Biden could act as soon as this week to address soaring gasoline prices.

“We believe that whatever the announcement is will only have a short-term impact on price, but because of the uncertainty the market is pulling back a little bit,” said Phil Flynn, senior analyst at Price Futures Group.

US energy firms this week added oil and natural gas rigs for a third week in a row. The oil and gas rig count, an early indicator of future output, rose six to 556 in the week to November 12, its highest level since April 2020, energy services firm Baker Hughes Co said on Friday.

US Shale oil output surges
Surging oil and natural gas prices are spurring production increases from West Texas to the Upper Great Plains that probably will lift output to levels not seen since the early days of the pandemic, according to Rystad Energy AS.
U.S. shale-oil production is expected to reach 8.68 million barrels a day in December, which would be the highest since March 2020, analyst at the Oslo-based research house said. Meanwhile, nationwide gas output is on its way to a 6-year high.
In the Permian Basin, crude production is expected to rise to 5.043 million barrels a day this month, which would be the most in data going back to 2015, according to Rystad.
U.S. oil prices surged more than 65% this year as economies emerged from lockdowns and OPEC and allied producers stuck to output limits despite pleas from President Joe Biden to boost exports.
Gas is up almost 90% during the same period amid robust domestic and overseas demand, and energy crises in Europe and Asia that have rippled across global markets.
American shale-oil production still lags levels seen in 2019 and the ongoing gains may be slowed as inflation and labor shortages hinders growth prospects.
-- Bloomberg

Russia’s Rosneft the world’s second-biggest oil company by output after Saudi Aramco, warned on Friday of a potential “super cycle” in global energy markets, raising the prospect of even higher prices as demand outstrips supply.

Still, though there are positive signs on the demand side, with air travel picking up rapidly, tighter monetary and fiscal policy and the looming Northern Hemisphere winter will act as a dampener.

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month’s forecast as high energy prices hampered economic recovery from the COVID-19 pandemic.

OPEC, Russia and allies, together known as OPEC+, agreed last week to stick to plans to add 400,000 bpd to the market each month.

“The oil market is sleepwalking into a supply surplus,” said Stephen Brennock of oil broker PVM. “OPEC and its allies will at the very least need to put a pause on the easing of their supply curbs in the new year. Inaction will result in global oil stocks swelling once again.”