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Futures Movers: Oil ends lower as worries over Gulf outage ease, but crude books weekly gains

Oil futures ended lower Friday after news reports indicated supply disruptions in the Gulf of Mexico were likely to be short lived. The pullback cut into weekly gains attributed to easing worries about recession in Europe and the U.S. in particular.

Price action

West Texas Intermediate crude for September delivery



fell $2.25, or 2.4%, to close at $92.09 a barrel on the New York Mercantile Exchange, leaving the U.S. benchmark with a 3.5% weekly rise.

October Brent crude

the global benchmark, was off 76 cents, or 0.8%, at $98.84 a barrel on ICE Futures Europe, headed for a 4.1% weekly advance.

Back on Nymex, September gasoline

fell 0.8% to end at $3.046 a gallon, but saw a weekly jump of 6.7%. September heating oil

rose 1% to $3.5178 a gallon, up 9.4% for the week.

September natural gas

dropped 1.2% to $8.768 per million British thermal units, up 8.7% on the week.

Market drivers

A Louisiana official said a damaged oil-pipeline component was due to be replaced by the end of the day, Reuters reported. The damaged flange had disrupted flows from offshore platforms in the Gulf.

The number of U.S. oil rigs last week rose by 3 to 601 this week, according to oil-field services firm Baker Hughes.

The energy complex was previously in bounce mode after WTI fell more than 9% last week and Brent dropped 8.7%. Crude oil subsequently found a footing after last Friday’s strong U.S. jobs report and inflation data this week that showed price pressures moderating. That was boosting hopes that the Federal Reserve wouldn’t need to raise interest rates as aggressively as feared, potentially leaving room for policy makers to rein in still red-hot inflation without sending the economy into recession.

There’s more than a hint of irony in that market narrative, however, noted Alex Kuptsikevich, senior market analyst at FxPro, with a fallback in gasoline prices from record highs the biggest factor in cooling the July consumer-price index reading.

“A sharp slowdown in price growth and a reduction in the fuel component fueled speculation that the Fed would slow policy tightening. But oil is a risky asset, so the rest of the market enjoyed a rise,” he said, in a note. “The implication is that oil rose this week because the economy showed the effects of its decline in the previous two months.”

The price rally of the past week fits into a “corrective rebound picture,” the analyst wrote, warning that if bulls “do not find a new fundamental reason to buy at current levels near $94 for WTI in the next few days, we should expect a bear market recovery.”

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