Crude futures have steadied late in the session, following the stock market slightly higher, after earlier swinging lower on a weakening oil demand outlook.
Stock markets worldwide bounced back on Friday after a multi-day sell-off but remained on track for their biggest weekly losses in months, while US Treasury yields inched higher and the dollar held its gains.
The move prompted oil futures to tick slightly higher late in the day after coming under pressure from a bearish demand forecast.
The International Energy Agency, the West’s energy watchdog said in its monthly report that the market looked ‘adequately supplied for now’ and trimmed its forecasts for world oil demand growth this year and next.
‘This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data,’ said the IEA, which advises industrialised countries on energy policy.
Brent crude settled up 17 cents a barrel at $US80.43, after dropping 3.4 per cent on Thursday.
US crude futures rose 37 cents to $US71.34 a barrel.
‘The weaker outlook has gotten a raised profile in the market, but there’s potential for a real supply crunch toward the end of this year,’ said John Kilduff, a partner at Again Capital Management in New York.
‘The demand outlook is hurt right now because of the situation with the US and China in particular.’
Both benchmarks fell for the first time in five weeks, pressured by a big rise in US inventories and fading concerns about shrinking global supplies due to looming US sanctions on Iran’s oil exports.
US crude was down 3.6 per cent on the week, while Brent crude fell 4.1 per cent.
The IEA report is the latest official forecaster to predict weaker demand ahead and conclude that supply is adequate.
The Organisation of the Petroleum Exporting Countries made a similar move on Thursday.
‘The bearish alarm bells are ringing for next year’s oil balance as market players brace for the return of a supply surplus,’ said Stephen Brennock of oil broker PVM.
Additionally, the US oil drilling rig count rose this week for the first time in four weeks, an indication that production is rising.
Drillers added eight oil rigs in the week to October 12, bringing the total count to 869, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
The increase is the biggest weekly gain since mid-August.
Money managers cut their net long US crude futures and options positions in the week to October 9, the US Commodity Futures Trading Commission said on Friday.
The speculator group cut its combined futures and options position in New York and London by 36,652 contracts to 296,456 during the period.
A drop in US oil production this week supported prices. US Gulf of Mexico producers have cut oil output by 32 per cent and natural gas production by 13 per cent as a result of the lingering effects of Hurricane Michael, the Bureau of Safety and Environmental Enforcement said on Friday, citing reports from 27 companies.
The reductions continued as oil and gas companies moved more workers back to production platforms that were evacuated earlier in the week.
As of Friday morning, nine platforms were still unoccupied, BSEE said in a daily update, down from 89 platforms on Wednesday.