Oil futures ended lower Friday for a fourth straight session, with U.S. benchmark crude prices down more than 4% for the week, as a round of tough talk on inflation from central bankers stoked renewed concerns about an economic slowdown.
West Texas Intermediate crude for March delivery
fell $2.15, or 2.7%, to settle at $76.34 a barrel on the New York Mercantile Exchange, with the front-month contract down 4.2% for the week, according to Dow Jones Market Data. The contract expires at the end of Tuesday’s session. U.S. markets are closed Monday for the Presidents Day holiday.
April Brent crude
the global benchmark, lost $2.14, or 2.5%, to end at $83 a barrel on ICE Futures Europe, leaving it down 3.9% for the week.
Back on Nymex, March gasoline
fell 1.1% to $2.4082 a gallon, losing 3.8% for the week, while March heating oil
declined 3.5% to $2.7121 a gallon, posting a weekly loss of 5.3%.
March natural gas
fell 4.8% to settle at $2.275 per million British thermal units, the lowest finish since Sept. 28, 2020. It marked a weekly drop of 9.5%.
Oil was under pressure along with equity markets after remarks by a pair of U.S. Federal Reserve officials on Thursday raised the possibility of the central bank resuming supersize rate hikes in response to sticky inflation readings.
Oil prices “caught between a rock and a hard place or, to put it another way, the Fed and a hard landing,” said Stephen Innes, managing partner at SPI Asset Management, in a market update.
Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard, in separate appearances, said they each saw a case for a 50 basis-point, or half a percentage point, rate increase at the Fed’s Jan. 31-Feb. 1 meeting, when policy makers delivered a 25 basis point rise.
Also see: Fed’s Barkin backs sticking with 25-basis-point hikes in the future
European Central Bank Executive Board member Isabel Schnabel also warned that markets may be underestimating inflation, and the risk that the ECB “may have to act more forcefully” against it.
The possibility of more aggressive rate hikes by the Fed has helped to strength the dollar, with the ICE U.S. Dollar index
trading 0.3% higher for the week.
Read: U.S. Dollar Index touches six-week high as traders revise Fed rate-hike expectations
Also, with “oil rallies constantly petering out, traders had turned wary, especially as higher-than-expected U.S. and Russian production and the loss of gas-to-oil switching left the oil market with higher-than-expected global inventories,” said Innes. “Higher inventories are not typically the calling card for a running of the bulls in oil markets.”
On Wednesday, the Energy Information Administration reported that U.S. commercial crude inventories rose by 16.3 million barrels for the week ended Feb. 10, with supplies up an eighth consecutive week.
Read: Baker Hughes data show a weekly decline in active U.S. oil-drilling rigs
While the supply climb was “primarily due to a data adjustment, it continues to suggest market’s face a near-term oversupply of crude as refiners have been slow to respond,” said Robbie Fraser, manager, global research & analytics at Schneider Electric, in a daily note.
Meanwhile, natural-gas futures registered a loss of nearly 10% for the week.
“We believe the steepness of the drop in prompt U.S. natural gas prices reflects that the market remains in a ‘show-me’ mode, looking for a fundamental response in balances at lower price levels for reassurance that storage will avoid breaching capacity ahead of next winter,” analysts at Goldman Sachs wrote in a research note dated Thursday.
The EIA on Thursday reported a decline of 100 billion cubic feet in domestic natural-gas supplies for the week ended Feb. 10, with working gas in storage at 2.266 trillion cubic feet — above the year ago and five-year average.
“With a potential supply response delayed by normal lags between prices, drilling activity, and production, the key question for gas balances is whether we will see power generation respond in size to lower gas prices, switching away from [Powder River Basin] coal and into gas,” analysts at Goldman said.