Futures Movers: Oil climbs, but set for weekly loss on supply rise

Oil futures rose Friday, with the global benchmark pushing back above $80 a barrel, but remained on track for a weekly stumble as rising U.S. inventories overshadowed concerns about U.S.-Saudi tensions.

The U.S. benchmark, November West Texas Intermediate crude for November delivery CLX8, +1.02%  on the New York Mercantile Exchange, rose 60 cents, or 0.9%, to $69.25 a barrel. It was on track for a weekly fall of 2.9%. The global benchmark, December Brent crude LCOZ8, +1.19%  was up 91 cents, or 1.1%, to $80.20 a barrel, leaving it on track for a weekly fall of 0.3%.

Crude prices fell sharply Thursday, with the U.S. benchmark tallying a two-day drop of more than 4% following a fourth straight weekly climb in crude inventories that has seen domestic supplies swell by a total of 22 million barrels over that period. More information on the supply front might be gleaned from the release later Friday of weekly rig-count data from oil-field-services firm Baker Hughes.

Meanwhile, investors appear to have pushed aside any worries that tensions over the potential involvement of Saudi officials in the disappearance and alleged murder of dissident journalist Jamal Khashoggi could derail expectations Saudi Arabia will continue to work to fill the gap in oil supplies left by Iran as renewed U.S. sanctions take full effect early next month.

Oil bulls contend traders might be overly sanguine about those supply prospects.

The Saudis have more than offset the declines in Iranian exports so far, with Iranian exports down by around 700,000 barrels a day in October compared with July, while Saudi production stands near 10.7 million barrels a day, noted Jason Gammel, equity analyst at Jefferies, in a Friday note.

But spare capacity remains at “precariously low” levels and could remain below 1 million barrels a day through the fourth quarter, depending on the effectiveness of U.S. sanctions on Iranian crude and refined export products, he said.

“ While most incremental demand data points have been negative (not the least of which is the steep drop in refining margins) we remain constructive on crude prices given the risks around supply,” Gammel wrote.

Continued weakness in global equities was also a weight on crude this week, analysts said, underlining worries about global growth prospects and dampening demand for assets perceived as risky, including most commodities.

In other energy trade, November gasoline RBX8, +1.57%  jumped 1.5% to $1.9186 a gallon, while November heating oil HOX8, +0.98%  was up 0.8% at $2.3135 a gallon.

November natural-gas futures NGX18, -0.78%  declined 1.3% to $3.157 per million British thermal units.

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