Oil fell from an 11-week high as traders locked in profits and the commodity’s 200-day moving average again provided a barrier to further advances.
(Bloomberg) — Oil fell from an 11-week high as traders locked in profits and the commodity’s 200-day moving average again provided a barrier to further advances.
Both West Texas Intermediate and Brent are still headed for their third straight week of gains as supply disruptions in Africa and a reduction in shipments from Russia tightened the market.
WTI futures ended the session around $75 a barrel, up roughly 2% this week. The US benchmark hasn’t breached its 200-day threshold since August, although futures came close in April. Brent settled below $80 a barrel.
“Technicals are driving trading action today as crude is bumping up against significant resistance,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth.
Weak refining margins in some parts of the US have also weighed on sentiment, making it more challenging for prices to break past the resistance even as macro signals improve, said Scott Shelton, an energy specialist at ICAP.
Still, traders said the losses on Friday are likely temporary, both from a technical and fundamental perspective.
“It might not be a bad thing if prices now consolidate below the 200-day average for a few days, in order to regain some energy and then break higher,” said Fawad Razaqzada, a market analyst at StoneX Group.
The rally earlier this week was driven in part by supply disruptions. Protesters shut a major Libyan oil field, Sharara, late Thursday after output from the smaller El Feel field was halted earlier in the day. Meanwhile, flows from the Forcados oil terminal in Nigeria have been suspended to check for a possible leak. That follows signs that Russian flows are finally starting to decline, four months after the country was due to slash output.
Traders will closely watch for the Federal Reserve’s next move on interest rates, as well as a potential response among G-7 policy makers after prices for Russian crude surged over their cap, said Arne Lohmann Rasmussen, head of research at A/S Global Risk Management Ltd.
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