Oil posts weekly gain as traders assess demand outlook and Iran deal
(Bloomberg) – Oil fell on Friday but still posted a weekly gain as traders weighed the outlook for higher demand this winter against the potential for Iranian supply to return.
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West Texas Intermediate futures ended the week up 3.5% after losing 2.4% on Friday. Iran has said it could accept a European Union-brokered nuclear deal if it receives certain guarantees. The prospect of greater oil supply wiped out any gains earlier in the session.
Crude has been mowed down by a flurry of bearish and bullish headlines in recent days. Still, slowing inflation, which could slow the pace of interest rate hikes by the Federal Reserve, largely supported commodities.
“I think we’re going higher,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “The US demand numbers were better and we’ve priced in a lot of negative demand adjustments in the market at this point,” she added.
The International Energy Agency this week raised its forecast for global demand growth, which supported prices. On the other hand, the Organization of the Petroleum Exporting Countries expects the global market to swing into surplus this quarter and has revised down the forecast for how much crude it will have to pump.
And while many analysts and traders believe the prospect of an Iran nuclear deal has not yet priced into the market, the likelihood of a deal is growing. Both sides, the United States and Iran, have made enough additional progress to alter base-case expectations for the timing of a deal from the first quarter of 2023 to the fourth quarter of 2022, Rapidan Energy Group said in a statement. note.
“The oil picture will be nearly impossible to predict reliably,” given the range of wildcards in the market right now, said Tamas Varga, analyst at PVM Oil Associates Ltd.
Although prices have rallied this week, options markets tell a different story. Traders are paying the biggest premium for bearish puts over bullish calls since February. This gauge – known as the put skew – has grown steadily since concerns about the strength of the global economy intensified.
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