Brent oil rose by more than $1 per barrel on Friday as traders kept close watch over a meeting between Western powers and Iran over its nuclear program and covered short bets into the weekend. US oil prices bounced higher and lower as the market tried to find its footing with some traders taking solid US jobs growth reported earlier in the day to mean that the US Federal Reserve would pull back on its quantitative easing program earlier than expected.
Oil also received support from civil unrest in Libya, where some of the worst fighting in months broke out in Tripoli on Thursday. Libyan protesters prevented a tanker from loading oil at the eastern Hariga port on Friday. "You've had kind of a down week and there are lots of moving pieces in the Mideast right now," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis. "If you've been short all week, why carry the shorts into the weekend?"
Brent had earlier hit a four-month low but soared $1.50 per barrel higher to a high of $104.96. It was last up $1.07 at $104.53 a barrel by 1:40 pm EST (1840 GMT), after trading as low as $102.98, the lowest since early July. US oil was up 29 cents $94.49 a barrel, after dropping to a session low of $93.90. US oil briefly turned negative earlier in the session after US Labour Department data showed an increase of more than 200,000 jobs last month. The positive economic data sparked fears that the US Federal Reserve may pull the brake on its quantitative easing program, which would dampen demand for oil.
"The better-than-expected non-farm payrolls fed brief fear that Fed will taper earlier but we've bounced off that," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut. Presumptions that Brent may be cheaper, or that US oil may get more expensive to ship after a train carrying crude oil derailed and exploded in Alabama, helped boost Brent's premium over US oil.
The European benchmark's premium over West Texas Intermediate (WTI), the grade of crude oil underpinning the US oil futures contract, widened by $1.13 to a high of $10.39 after earlier narrowing to a three-week low of $8.60 per barrel. It was last trading at $10 per barrel. Six western nations and Iran were expected to iron out an agreement during a meeting in Geneva that could ease sanctions against Iran, which have removed more than 1 million barrels per day (bpd) of oil from world markets. Any increase in supply from the Islamic Republic could hit prices hard.
A deal between the six Western nations and Iran was not yet imminent, US Secretary of State John Kerry said early on Friday, noting that "there are some important gaps that have to be closed." News that Saudi Arabia cut its crude output in October to 9.75 million bpd from 10.1 million in September also helped keep a floor under prices. The figures were given to Reuters by an industry source familiar with the matter.
Still, both Brent and US oil were on track for their fourth and fifth straight weeks of losses, respectively, as oil markets remain well supplied. The apparent improvement in relations between Iran and the West is raising the possibility of even more supply, analysts said. "The theme is overwhelmingly bearish," VTB Capital oil and commodities strategist Andrey Kryuchenkov said. "The long-term fundamental picture (for supply) is comfortable anyway you look at it."
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