By Barani Krishnan
Investing.com - Crude tumbled in volatile trading on Friday, with the world’s major producers struggling to adapt to the market’s biggest crisis in decades, as oil prices finished with another week of epic losses.
West Texas Intermediate, the New York-traded benchmark for U.S. crude prices, settled down $3.28, or nearly 13%, at $22.63 per barrel.
Just a day ago, WTI jumped 24%, reversing all of what it lost Wednesday. For the week, the U.S. crude benchmark was down 29%, following through with the previous week’s 23% slide.
Brent, the London-traded global benchmark for crude, settled Friday’s trade down $1.49, or 5.2%, at $26.98. For the week, Brent fell 20%, after the previous week’s 25% drop.
The epic losses in oil come amid a perfect storm of demand destruction caused by the Covid-19 pandemic and a production hikes-and-markets-share tussle between Saudi Arabia and Russia.
In Friday’s session, WTI initially fell more than 7% on a Bloomberg report that Russia “will not blink” in its face-off with Riyadh.
But by early afternoon in New York, WTI pared losses after industry firm Baker Hughes reported that rigs actively drilling for oil in the United States had fallen by 19 this week to 664. While a lagging indicator, the weekly rig count is one of the most trusted predictors of U.S. crude production.
Crude prices also came off their lows after Texas oil regulator Ryan Sitton said he had discussed the global oil and supply situation with OPEC Secretary-General Mohammed Barkindo and been invited to the cartel’s upcoming meeting in June.
Sitton is a member of the Texas Railroad Commission, which regulates the energy industry in the largest U.S. oil producing, The Wall Street Journal reported on Thursday that shale oil producers in Texas had approached the TRC for relief amid the crisis in oil prices on the back of the pandemic and the Saudi-Russian face-off. The TRC last imposed production curbs in Texas in the 1970s and Sitton has been reported to be leading the initiative to reintroduce them.
But TRC Chairman Wayne Christian poured cold water on Sitton’s plan later on Friday, saying he has some "reservations" about doing any production cuts in Texas. That promptly sent crude prices tumbling again.
“While I am open to any and all ideas to protect the Texas Miracle, as a free-market conservative I have a number of reservations about this approach," Christian said in a statement.
“First, Texas does not operate in a vacuum,” he said. “If we prorate our oil, there is no guarantee other nations, or even states will follow suit. From a practical standpoint, the Railroad Commission has not prorated oil in over forty years; we do not have staff at the agency with experience in this process and our IT capabilities to handle this process are limited at best."
Market participants, meanwhile, hunkered down for more volatility in the week ahead.
“I don't expect a strong rebound in the near-term, with neither Russia or Saudi Arabia looking likely to blink, but we could now start to stabilize around these incredibly low levels,” said Craig Erlam, senior market analyst at online trading platform OANDA.