Oil futures settled with a slight decline on Friday, dropping more than 7% for the week, as what one analyst called “The Three Stooges of market sentiment”—Greece, Iran and China—continued to stir trading.
Greece’s bailout proposals and a rebound in Chinese stocks helped ease worries about energy demand as traders kept an eye on Iran’s nuclear talks, but a monthly report that said oil demand may slowdown next year pressured prices. August West Texas Intermediate crude fell 4 cents, or 0.1%, to settle at $52.74 a barrel on the New York Mercantile Exchange. Tracking the most-active contracts, prices were down about 7.4% for the week.
August ICE Brent crude rose 12 cents, or 0.2%, to $58.73 a barrel, with prices still down roughly 2.9% on the week. “The selloff we have seen in the past week has been in large part due to The Three Stooges of sentiment—Greece, Iran, and China,” said Matt Smith, director of commodity research at ClipperData, in updated email comments. Despite some supportive influence from all three, crude prices “succumbed to a bout of selling into the weekend” on the International Energy Agency’s monthly report, which points to an oil market that is still ‘massively oversupplied’,” he said. The IEA Friday said global demand for oil would slow next year and warned that crude prices could resume a downward spiral. Matthew Parry, senior oil analyst at the IEA, told Market Watch in an email that even with the Organization of the Petroleum Exporting Countries maintaining supplies at current levels, the market still looks oversupplied.
With the possible return of Libyan and/or Iranian supplies, “testing times loom,” he said. Chinese equities rallied for a second straight session Friday and in Greece, Sunday is the deadline to reach a deal with creditors. The recent plunge in the Chinese stock market, as well as the turmoil surrounding Greece’s financial woes had raised concerns over energy demand in China and Europe.
Meanwhile, talks between Iran and the West over Iran’s nuclear program continued. BBC News reported that Iran has accused world powers of changing positions and talks were expected to continue into the weekend. The oil market is concerned that once a deal is reached, Iran may add millions of barrels of oil into an already oversupplied global market.
Data Friday from Baker Hughes showed a second-weekly rise in the number of U.S. active oil rigs, which climbed 5 rigs to 645 as of July 10, but prices didn’t appear to show any reaction.