Futures Movers: U.S. oil prices post weekly loss of 29%, biggest since 1991

Oil settled sharply lower on Friday, with U.S. prices down 29% for the week—the largest weekly loss since 1991—as economic stimulus plans from government and central banks fail to offset expectations for steep fall in demand due to coronavirus pandemic, and as Saudi Arabia and Russia oversupply the market.

Prices for U.S. benchmark West Texas Intermediate crude just a day earlier had posted their largest one-day percentage rise on record, partly due to comments from the Trump administration, which indicated that it was considering intervention in the oil-price war between Saudi Arabia and Russia.

“This is unlike anything we’ve experienced before,” said Marshall Steeves, energy markets analyst at IHS Markit. “Just think about [Thursday’s] biggest rally in crude oil since the contract’s inception in 1983, and it still didn’t recoup much of the substantial loss previously incurred.”

He attributes the collapse in prices to “the steep decline in demand due to all the lockdowns including California now and with New Yorkers working from home and not traveling” and “Saudi Arabia is set to flood the market at the same time that demand weakens.”

WTI prices may revisit their intraday low of $20.06 from Wednesday and “possibly the $10.65 low from 1998 when pre-[Hugo] Chavez Venezuela increased production at a time of slow global growth,” said Steeves. “Whether that happens depends on the duration and depth of the pandemic, which is something nobody knows and is unknowable.”

Following a late Friday change to its settlement, West Texas Intermediate crude for April delivery CLJ20, -21.33% fell $2.79, or 11.1%, to finish at $22.43 a barrel on the New York Mercantile Exchange on the contract’s expiration day. May WTI crude CLK20, -8.76% the new front month, fell $3.28, or 12.7%, to $22.63.

The move for WTI follows a gain of 23.8% on Thursday—the largest, front-month percentage rise on record based on data going back to March 1983, according to FactSet data. Prices on Wednesday settled at their lowest since February 2002.

May Brent crude BRNK20, +0.85% fell $1.49, or 5.2%, to $26.98 a barrel on ICE Futures Europe after tacking on 14.4% Thursday. On Wednesday, it posted its lowest finish since May 2003.

Oil posted gains on Thursday but suffered big weekly losses sparked by the global demand hit from the COVID-19 pandemic and compounded by the Saudi-Russian price war that will further flood an oversupplied market with more crude.

WTI crude futures settled 29.3% lower for the week, which was the largest weekly percentage decline since the period ending Jan. 18, 1991, according to Dow Jones Market Data. Brent crude saw a weekly loss of 20.3%.

A “price war truce is more elusive,” despite President Donald Trump saying he may get involved at some point, said Phil Flynn, senior market analyst at The Price Futures Group. “The Russians and Saudis look like they are hunkering down for a real battle.”

“The Kremlin accused Saudi Arabia of blackmail in insisting that they cut production,” he told MarketWatch. “Now, Saudi Arabia is looking to borrow money to ride out the storm.” The Saudi government plans to raise the debt ceiling to 50% of GDP from 30%, according to Reuters.

Bloomberg News reported Friday that Russian President Vladimir Putin will refuse to submit to what his government sees as oil blackmail from Saudi Arabia.

Meanwhile, The Wall Street Journal reported Thursday that regulators in Texas, the largest U.S. oil-producing state, were considering a cut to oil production. Several oil executives reached out to the Texas Railroad Commission, which regulates the industry, to request relief following the crash in oil prices, the report said, citing people familiar with the matter.

Separate, The WSJ reported that U.S. oil industry regulators are set to open talks with the Organization of the Petroleum Exporting Countries over a potential truce on oil between the U.S., Saudi Arabia and Russia.

Weekly data from Baker Hughes BKR, -1.38% also revealed a big weekly drop in active U.S. rigs drilling for oil. The oil-rig count fell 19 to 664 this week, implying an upcoming slowdown in production.

In other energy trading, April heating oil HOJ20, -3.25% fell 3.4% to $1.0063 a gallon, ending down 11.5% for the week. April natural gas NGJ20, -4.66% shed 3% to $1.604 per million British thermal units, settling 14.2% lower for the week after ending Wednesday at the lowest since 1995.

April gasoline RBJ20, -8.70% fell 11.6% to 60.54 cents a gallon, with prices marking a weekly loss of 32.7%.

At the U.S. retail level, the average price for regular gasoline was at $2.118 early Friday afternoon, down 34.9 cents from a month ago, according to fuel-price tracker GasBuddy.

Read:Retail gasoline prices drop to lowest since 2016

“Lots more price drops coming,” Patrick De Haan, head of petroleum analysis at GasBuddy, told MarketWatch earlier this week. “Motorists should not be in any hurry to fill up and should shop around.”

On Thursday, GasBuddy reported that a gasoline station in London, KY lowered its price to 99 cents a gallon.