Oil prices score weekly gain, breaking run of back-to-back weekly losses

By Myra P. Saefong and Isabel Wang

WTI, Brent pare gains after Friday's U.S. inflation data

Oil futures finished below Friday's session highs after the latest U.S. inflation data raised doubts that the Federal Reserve will lower interest rates anytime soon.

U.S. and global benchmark crude prices, however, posted weekly gains after registering back-to-back weekly losses.

Price action

West Texas Intermediate crude for June delivery CL.1 CL00 CLM24 climbed by 28 cents, or 0.3%, to settle at $83.85 on the New York Mercantile Exchange, with prices for the front-month contract ending 2% higher for the week, according to Dow Jones Market Data. June Brent crude BRN00 BRNM24, the global benchmark, added 49 cents, or nearly 0.6%, to $89.50 a barrel on ICE Futures Europe, for a weekly rise of 2.5%. May gasoline RBK24 rose 0.2%, at $2.76 a gallon, with prices up 2% for the week. May heating oil HOK24 shed 0.1%, to $2.55 a gallon, for a 0.3% weekly gain.Natural gas for May NGK24 settled at $1.61 per million British thermal units, down 1.5%. The contract, which expired at the end of the trading session, logged a weekly fall of 7.9%. The June contract NGM24, which is now the front month, fell 3.2%, to $1.92.

Market action

"There is certainly still a geopolitical fear bid in oil markets here with [West Texas Intermediate crude] prices in the low $80s," Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. "Geopolitical worries have eased from their most tense levels seen earlier in April as the escalation in the Middle East between Israel and Iran has receded back to a still unsettling, but notably more stable level."

Without the simmering geopolitical worries, WTI would likely be in the low-to-mid $70-a-barrel range, "at best," as consumer demand for gasoline has been sliding in recent weeks, while OPEC+ has made no changes to output policy in some time, he said.

On Friday, WTI and Brent crude held onto gains for the week, following two consecutive weekly declines. Both benchmarks settled at their highest since April 16.

It seems "some geopolitical risk premium has been erased from the market, and now the market is looking forward to supply and demand dynamics in the upcoming quarter, which should still be relatively tight," StoneX's Kansas City energy team, led by Alex Hodes, said in a Friday client note.

Even so, "the monitoring of Hamas' allies will still be important going forward to see if the war inflames any further, potentially dragging a larger regional conflict into play," they said.

Oil prices on Friday had eased back from the day's highs following the release of the U.S. March personal-consumption-expenditures price index reading.

The Fed's preferred inflation figure showed an increase of 0.3% last month, matching the forecast of economists polled by The Wall Street Journal. The more closely followed core rate that strips out food and energy also increased 0.3%.

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Recent economic data have "flashed signs of stagflation potentially gripping the economy," with GDP disappointing considerably on Thursday and Friday's inflation data coming in hotter than some anticipated, Richey said. The GDP report Thursday showed the economy expanded at a modest 1.6% annual pace in the first quarter.

Stagflation is defined as a situation of slow economic growth, inflation and high unemployment, which could ease energy demand.

Still, the fact that the oil futures market remains in backwardation, a situation where prices for oil for delivery in the near future are higher than those for later deliveries, suggests that demand is strong enough to still keep pressure on supply, creating an imbalance - a deficit - in the market that has persisted much longer than most traders anticipated it would," said Richey.

Overall, the fundamental backdrop of the global oil market "remains conflicted" as the near-term dynamics favor the bulls, with prices "at least maintaining current levels due to ongoing geopolitical risks overseas, economic data continuing to suggest the consumer remains resilient...and OPEC+ remaining disciplined in abiding by their individual output quotas," he said.

-Myra P. Saefong -Isabel Wang

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04-26-24 1526ET

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