Futures Movers: Oil shakes off earlier gains, with U.S. prices down 25% for the week

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An earlier version of the Futures Movers column included an incorrect price for WTI oil. The story has been corrected.

Bloomberg

Oil shook off earlier gains on Friday, with U.S. prices trading around 25% lower for the week as economic stimulus plans from government and central banks failed to offset pressure from expectations for steep coronavirus-fueled losses in demand and a Saudi-Russian price war.

Prices for U.S. benchmark West Texas Intermediate crude just a day earlier had posted their largest one-day percentage rise on record, partly due to comments from the Trump administration, which indicated that it was considering intervention in the oil-price war between Saudi Arabia and Russia.

A “price war truce is more elusive,” despite President Donald Trump saying he may get involved at some point, said Phil Flynn, senior market analyst at The Price Futures Group. “The Russians and Saudis look like they are hunkering down for a real battle.”

“The Kremlin accused Saudi Arabia of blackmail in insisting that they cut production,” he told MarketWatch. “Now, Saudi Arabia is looking to borrow money to ride out the storm.” The Saudi government plans to raise the debt ceiling to 50% of GDP from 30%, according to Reuters.

Bloomberg News reported Friday that Russian President Vladimir Putin will refuse to submit to what his government sees as oil blackmail from Saudi Arabia.

West Texas Intermediate crude for April delivery CLJ20, -4.24%  on Comex fell $1.12, or 4.4%, to $24.10 a barrel on the New York Mercantile Exchange, ahead of the contract’s expiration at the day’s settlement.

The move for WTI follow a gain of 23.8% on Thursday—the largest, front-month percentage rise on record based on data going back to March 1983, according to FactSet data. Prices on Wednesday settled at their lowest since February 2002.

May Brent crude BRNK20, -1.33%  fell 44 cents, or 1.6%, to $28.03 a barrel on ICE Futures Europe after tacking on 14.4% Thursday. On Wednesday, it posted its lowest finish since May 2003.

Oil posted gains on Thursday but remains on track for big weekly losses sparked by the global demand hit from the COVID-19 pandemic and compounded by the Saudi-Russian price war that will further flood an oversupplied market with more crude.

WTI crude futures traded more than 25% lower for the week, on track for its worst week since December 2008. Brent crude eyed a weekly loss of over 17%.

Meanwhile, The Wall Street Journal reported Thursday that regulators in Texas, the largest U.S. oil-producing state, were considering a cut to oil production. Several oil executives reached out to the Texas Railroad Commission, which regulates the industry, to request relief following the crash in oil prices, the report sid, citing people familiar with the matter.

The Commission has its roots in the late rough and tumble days of Texas in the 1890s, said Flynn, in a daily report. “They set the rates and the rules and how they would classify freight. They took over oil regulation, and when Texas was the leading producer in the world, set prices for the world and regulated output.”

Many times they “set a price advantage that would benefit Texas,” said Flynn. “That ticked off some Middle Eastern producers and helped inspire them to nationalize oil companies and set up their own cartel called OPEC”—the Organization of the Petroleum Exporting Countries.

“Texas lost their power when OPEC took over, and saw Texas production decline,” added Flynn.

In other energy trading, April gasoline RBJ20, -1.52%  lost 1% to 67.80 cents a gallon, with prices on track for a weekly loss of 24%, while May heating HOK20, -0.67%  tacked on 0.3% to $1.0449 a gallon, trading down 8% for the week. April natural gas shed 0.9% to $1.641 per million British thermal units, trading about 12% lower for the week after settling Wednesday at the lowest since 1995.

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