Oil prices edged lower in light profit-taking on Friday, but ended higher on the week, as supply threats from the Middle East and Libya and the ongoing crisis in Japan sidelined many players. Protests in Yemen, Syria, Bahrain and by Shias in Saudi Arabia kept concerns about unrest and the threat to oil supply from region in focus, as traders braced for a long-term disruption of supplies from Libya.
But the uncertainty about the impact on oil demand of the crisis in Japan, where radiation fears escalated, have added to market concerns, pushing trading volumes for the week to the lowest level since the end of 2010. Brent crude futures for May delivery fell 13 cents to settle at $115.59 a barrel, having seesawed between $115.20 and $116.13. Brent managed to end 0.6 percent higher for the week, a second straight weekly gain.
US May crude futures fell 20 cents to settle at $105.40 a barrel, swinging between $104.50 and $105.95. For the week, front-month US futures gained 4.28 percent, the best percentage rise since the week to March 4. Data from the Commodity Futures Trading Commission showed speculators increased their bullish bets in the week to Tuesday, hiking their net-long positions in US crude oil futures and options in the week to Tuesday although overall open interest was down.
"We've had a good run this week and for today, we are seeing some pre-weekend profit-taking. While there is a lot of turmoil in the Middle East, none of the ongoing unrest affects big oil producers," said Ed Meir, senior commodities analyst at MF Global in New York.
Brent's premium to the US benchmark West Texas Intermediate crude dipped slightly, down 5 cents at $10.29 a barrel late in the day but off more than $1.50 for the week as traders took profits on the spread. Despite US crude gains for the week, it stalled short of 2011 peaks, failing to breach the March 7 high of $106.95 reached on March 7.
Total US crude trading volume, at just over 392,000 lots traded, was 53 percent below the 30-day average. Brent trading volume also remained anemic at just above 238,000 lots. The weekly US trading volume, at about 2.49 million lots with 1-1/2 hours of post-settlement trading left on Friday, was on track to be the lowest since the 1.379 million lots were traded in the week to December 31, 2010.
Rebel forces and those loyal to Libyan leader Muammar Gaddafi clashed as Western warplanes struck at armour used by the government to crush the revolt. With an expected summer driving demand boost and continuing supply uncertainty, J.P. Morgan analysts headed by Lawrence Eagles raised oil price forecasts for 2011 for Brent and US crude.
"So long as ongoing problems in the Middle East continue to elevate risks of a further supply disruption, there is a strong likelihood of a price spike in the second quarter as the market demands additional oil to meet summer demand," J.P. Morgan said in a research note. Analysts polled by Reuters this week forecast oil prices will hold over $100 a barrel through 2013, due to tensions in the Middle East, with average forecasts for 2011 raised by $12 to over $104 a barrel.
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