Investing.com - After a midweek surge and a large weekly gain, oil’s advance seems to be slowing, raising questions on how well it’ll hold the upward momentum for the coming week.
West Texas Intermediate, the benchmark for New York-traded crude, and London’s Brent, the global gauge for oil, settled Friday’s trade up less than 1% each after drifting through most of the day with little meaningful change. Both benchmarks had put in a spirited performance earlier in the week on data showing strong U.S. oil consumption.
In the latest session, WTI settled up 43 cents, or 0.8%, at $56.66 a barrel, after reaching a three-week high of $56.72.
Brent ended trading for the regular U.S. session up 35 cents, or 0.6%, at $62.02, reaching a three-week high of $62.09 before the close.
For the week, WTI ended up 5.4% gain while Brent posted an advance of 4.4%.
“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 to 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 versus analysts’ expectations for a 2.2-million-barrel build.
The EIA has also reported sharp drops in stockpiles of fuel such as gasoline and distillates in recent weeks as refiners’ run rates fell to abysmally low levels amid long plant closures to meet new maritime fuel processing standards.
Another factor 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.
But with a potential heightening in Brexit troubles and other worrying global data next week, oil may have more headwinds than it can contend with, some traders said.
“The bulls seem to be counting on refiners to continue staying away forever and not make new fuel products to replenish depleting stocks,” said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors in New York. “I don’t think that’s going to be the case.”