Rising crude oil prices record their biggest weekly drop since November
Oil prices rose on Friday, but recorded the steepest weekly drop since November as investors weighed possible improvements despite the outlook for supply disrupted by Russia's invasion of Ukraine. Oil benchmarks are down by 5-6% this week after a 20% increase last week.
Crude oil prices rose sharply after the invasion, which Moscow has dubbed a "special military operation." On Friday, supply concerns rose again as talks to revive the 2015 Iran nuclear deal threatened to collapse.
Brent crude futures rose $3.34, or 3.1%, to settle at $112.67 a barrel after hitting session lows of $107.13 on Friday. West Texas Intermediate (WTI) crude futures settled at $109.33 a barrel, up $3.31, or 3.1%, after session lows of $104.48.
Brent, which rose over 20% last week, is down 4.8% this week after hitting $139.13 on Monday. WTI crude fell 5.7% week on week after hitting $130.50 on Monday. Both contracts last touched these price peaks in 2008.
US imposes new sanctions on Russia, pauses Iran talks. The suspension of the Iran talks has been a major factor supporting the markets, and market participants will now be keeping a close eye on Russia's export data to understand what the interrupted supply is.
Banning Russian oil this week, the United States said the G7 industrialized nations would revoke Russia's "most preferred country" trade status, and announced that the United States has banned Russian seafood, alcohol and diamonds.
Markets will focus on oil market reports from the International Energy Administration (IEA) and Organization of the Petroleum Exporting Countries (OPEC) to see supply data next week.
US government officials urged domestic and global manufacturers to increase production. An early indicator of future output, rig data in the US showed drillers added 13 oil and gas rigs this week, increased to 663.
The Russia-Ukraine conflict has forced the United States and many Western oil companies to stop buying Russian oil. There are negotiatins of potential supply additions from Iran, Venezuela and the United Arab Emirates.
The group's ability to offset the supply produced by Russia is limited, as some OPEC+ producers, including Angola and Nigeria, are struggling to meet production targets.
Given that Russia is part of OPEC+, it is unlikely that supply gaps will be filled in the near term by extra production from OPEC members and allies. In the long run, the group can indirectly reintegrate Russian oil to the system with some internal formulas.
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