Oil prices dropped on Friday, on investor concerns that potential coordinated releases by the world’s major economies of their official crude reserves to try to lower prices may have less of an impact than expected.
U.S. West Texas Intermediate (WTI) crude for December delivery was down $2.97, or $3.37 at $75.86 a barrel, having swung through a more than $2 range the previous session before closing up.
The December contract expires on Friday and most trading activity has shifted to the January future, which was up 60 cents, or 0.8%, at $79.01 a barrel.
Both Brent and WTI are set for a fourth week of declines.
The market gyrations on Thursday followed a Reuters report that the United States had asked China, Japan and other big buyers to join a release of crude stocks from Strategic Petroleum Reserves (SPR).
“However, the market remains fundamentally tight and any volumes released are unlikely to substantially alter the global balance,” Fitch Solutions commodities analysts said in a note. “As such, we expect any downside to prices to be limited in both scale and duration.”
The Biden administration’s push for a coordinated release of oil stockpiles has been seen as a signal to the OPEC+ production group that it should raise output to address concerns of high fuel prices in the world’s biggest economies, starting with the United States, China and Japan.
Brent has surged almost 60% this year, recently driven a wider energy crunch as economies recover from the COVID-19 pandemic at the same time the Organization of the Petroleum Exporting Countries (OPEC), and allies, known as OPEC+, has only gradually raised output.
The market structure for Brent remains backwardated, which is when prompt prices are higher than later-dated futures. That typically indicates that oil demand is higher than supply and is considered bullish for prices.
However, the backwardation has decreased amid the swings over the last two sessions, a sign the tightness in the market is easing.
The price difference between the front-month Brent crude contract and the one for six months later was $4.30 a barrel, down from an eight-year high of $6.30 earlier this month. Physical crude markets also showed some easing, traders said.
OPEC has maintained what analysts say is unprecedented restraint on production, even as prices have rebounded from the depths of the early stages of the coronavirus pandemic.
Data showing Saudi Arabia’s oil exports hit an eight-month high in September, rising for a straight fifth month, also helped keep prices in check.