After a midweek surge oil saw a return to range-bound trading before the weekend. Crude just can’t hold a bid for too long.
West Texas Intermediate, the benchmark for New York-traded crude, and London’s Brent, the global gauge for oil, drifted with little meaningful change Friday despite being up nearly 5% on the week from a midweek rally driven by strong U.S. oil consumption.
WTI was up 9 cents, or 0.2%, at $56.32 a barrel by 1:00 PM ET (17:00 GMT) after reaching a three-week high of $56.55 earlier in the day.
Brent slid 12 cents, or 0.2%, to $61.55, reaching a three-week high of $61.92 earlier in the session.
For the week, WTI was on track to a 4.6% gain while Brent was on course for a weekly gain of 3.7%.
“The market with the entire complex is not looking into the crystal ball, like the futures markets have done in the past,” Dan Flynn, analyst at Chicago’s Price Futures Group, said in his notes on oil.
Flynn said algorithmic trading models have forced fundamentals take a back seat in oil, ignoring a “real shortage” in crude.
“The algos seem to be jumping on every headline, bogus or not, and drive traders that do not have deep pockets out of the market only to boomerang back after the damage has been done,” he added.
Oil had seen dreary trading for more than a week until the U.S Energy Information Administration surprised the market on Wednesday, announcing a 1.7-million-barrel drop in domestic crude stockpiles last week, versus analysts’ expectations for a 2.2-million-barrel build.
Also supporting crude prices was a Reuters report hinting at the likelihood of the forthcoming OPEC meeting in December considering deeper cuts than the 1.2 million barrels per day agreed by the cartel and its key ally Russia almost a year back.
