Oil futures fell Friday as traders continued to take their cues from global equity markets, which saw a renewed slide to end a volatile week.
West Texas Intermediate crude for December delivery CLZ8, -0.34% on the New York Mercantile Exchange fell 51 cents, or 0.8%, to $66.82 a barrel. The U.S. benchmark was on track for a 3.6% weekly decline. December Brent crude LCOZ8, +0.25% the global benchmark, was off 39 cents, or 0.5%, to $76.50 a barrel and was headed for a 4.1% weekly fall.
Global equities were under pressure after a Thursday bounce, with U.S. stock indexes moving sharply lower on Wall Street. Losses in the equities markets fuel worries about the economy—and energy demand.
“Crude has moved with the broader selloff in risk assets and we expect that the liquidation of managed money length, which concentrates at the front end of the curve, has been a significant influence on the collapse in backwardation,” said Jason Gammel, equity analyst at Jefferies, in a Friday note.
In backwardation, futures prices are below the spot market. In contango, prices for future delivery rise above the spot market, which can encourage traders to store oil. Pressure on Brent has seen the front end of the futures curve approach contango over the last two days, he noted.
At the same time, the market has been “well-supplied due in large part to the surge in production from Saudi Arabia et al before the full effects of U.S. sanctions hit Iranian exports on Nov. 4,” Gammel said. And rising U.S. crude inventories are also hard to ignore, with crude inventories surging 28.7 million barrels over the last five weeks, including the absorption of 3.5 million barrels from the Strategic Petroleum Reserve, he said. And while the rise in crude inventories in part reflects seasonal factors, inventories of U.S. energy products have seen only a modest decline of 10 million barrels over the same period.
Tyler Richey, co-editor of the Sevens Report, however, said that the focus for traders right now should “be on broader risk assets and money flows because despite the moving pieces in the fundamentals, another wave of volatility, or a snap-back rally in equity markets will drag oil prices in the same direction.”
Traders also await weekly data on the number of U.S. oil rigs from oil-field services firm Baker Hughes BHGE, -0.80% later Friday. It reported increases in each of the last two weeks.
In other energy trade, November gasoline RBX8, -0.60% dropped 1.3% to $1.789 a gallon—trading down about 6.5% for the week, while November heating oil HOX8, +0.40% traded flat at $2.278 a gallon, looking at a weekly loss of 1%.
November natural gas NGX18, -2.28% which expires at Monday’s settlement, fell 2.6% to $3.121 per million British thermal units, set for a weekly loss of 3.9%.
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.