Oil prices fell on Friday with Brent on track for its first weekly dip in seven weeks as demand for oil products in power generation cooled off amid easing coal and gas prices, while a forecast for a mild U.S. winter also weighed on the market.
Brent crude futures dropped 48 cents, or 0.6%, to $84.13 a barrel at 0502 GMT, extending a $1.21 slump in the previous session.
Brent touched a three-year high of $86.10 on Thursday but was on track to slip 0.8% in the week, the first weekly dip since Sept. 3.
U.S. West Texas Intermediate (WTI) crude futures fell 37 cents, or 0.5%, to $82.13 a barrel, following a 92-cent loss on Thursday.
“Crude oil has witnessed some correction as part of a sell-off across commodities amid renewed virus concerns and forecast of a milder winter in the United States. Crude oil’s sharp rise may make it vulnerable to profit-taking, however, a substantial correction may not happen unless the global energy crisis subsides.” Ravindra Rao, vice president, commodities at Kotak Securities.
Winter weather in much of the United States is expected to be warmer than average, according to a National Oceanic and Atmospheric Administration forecast.
The market hit multi-year highs earlier in the week on worries about coal and gas shortages in China, India and Europe, which spurred fuel-switching to diesel and fuel oil for power.
“Global gas and coal prices have eased but concerns persist with tighter market and higher demand winter season around the corner.”
U.S. crude found support earlier this week as investors eyed low crude stocks at the major Cushing storage hub in Oklahoma.
“There are clear concerns over the inventory drain that we are seeing at the WTI delivery hub, Cushing,” ING commodities strategists said in a note.
U.S. Energy Information Administration data on Wednesday showed crude stocks at Cushing fell to 31.2 million barrels, their lowest level since October 2018.
“In a broader future, oil prices should move higher on its supply and demand relationship, but the bullish sentiment provoked by a surprise draw of U.S. inventory may have been digested,” Leona Liu, analyst at Singapore-based DailyFX.