Oil heads for largest weekly loss since August

Oil edged up on Friday but is still on track for the largest weekly loss since August as investors weighed the likelihood of major oil-consuming countries stepping in to supply the market with additional barrels afterOpec+’s supply decision.

Futures in New York rose as much as 1.7% on Friday, though prices have shed nearly 5% this week. After oil cartel Opec and its allies agreed to only boost supplies gradually, the US is looking at a potential release from the Strategic Petroleum Reserve to bring down prices, according to energy secretary Jennifer Granholm. Japan said it is in close contact with the US and the IEA as pressure from consumers grows. 

“Opec+ has made clear they’re not interested in changing the pace of their increase in output, but there still can be a shale response here in the US ” said Rob Haworth, senior investment strategist at US Bank Wealth Management. The question is, “is there going to be a change in the approach to oil investment here domestically?”

Oil has rallied to multiyear highs this year as major economies including the US and China recover from the pandemic, with BP estimating global demand has rebounded above the pre-virus level of 100-million barrels a day. A global energy crunch due to coal and natural gas shortages has also worsened the tightness in the oil market.

After a brief meeting Thursday, Opec and its allies agreed to boost output by 400,000 barrels a day in December. The group has cited risks from ongoing outbreaks for its cautious approach. Price volatility is likely to rise in the coming weeks after the alliance shunned a US request for more crude, according to Goldman Sachs , adding that the market remains undersupplied. 

For months, President Joe Biden has led calls for Opec+ to add more barrels to tame high oil prices, which he blames for inflationary pressures. The US was seeking an increase of as much as double the amount that was agreed and has been among key consumers that previously raised the prospect of tapping their own strategic reserves if the alliance didn’t co-operate.

“The ball is back in Biden’s court; is he going to do the SPR release?” Amrita Sen, chief oil analyst at consultant Energy Aspects said in a Bloomberg Television interview. “It’s going to be a short-term measure, it will not solve the problem” of low stocks, she added. 

“Oil is not the problem,” Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said after the Opec+ meeting on Thursday, citing natural gas shortages. “The problem is the energy complex is going through havoc and hell.”

Bloomberg. More stories like this are available on bloomberg.com