Oil prices slumped on Friday, reversing volatile trade and pulled down by the US heating oil contract, which fell more than 20% as the day drew to a close.
The front-month US heating oil contract, an indicator for diesel prices, rose to a record high of $5.8595 per gallon before falling as low as $4.4067 per gallon. Diesel futures rose as investors worried about a global shortage of supplies after Russia’s invasion of Ukraine.
The heating oil contract expires Friday, along with Brent and US gasoline futures. Analysts said volumes on the three preliminary months contracts were low, creating excessive volatility in the market and leading to intraday selling.
The more active second-month Brent crude oil futures contract fell 12 cents to settle at $107.14 a barrel. The expiring front-month contract rose $1.75 to $109.34 a barrel.
West Texas Intermediate (WTI) crude fell 67 cents to $104.69 a barrel on Friday.
The volatility of the front-month heating oil contract was not reflected in the more active second month US heating oil contract, which settled at $4,0172 per gallon, earning $0.0088 per gallon.
Both Brent and WTI rose this week, posting their fifth consecutive monthly earnings. Brent closed the month with 1.3% gains and WTI 4.4% gains.
Prices rose on fears that Russian supplies will continue to be disrupted by the conflict in Ukraine. Futures rose this week as Germany became more likely to join other European Union member states that have embargoed Russian oil.
According to the documents, Russia’s oil production could fall by as much as 17% this year as Western sanctions over Russia’s invasion of Ukraine hurt investment and exports.
As an indicator of future supply, the number of US oil and gas rigs rose three to 552 this week.
The Organization of Petroleum Exporting Countries and its allies are expected to stick to their existing agreements and agree to a small production increase for June, sources said.
On the demand side, China showed no signs of easing lockdown measures that have hit its economy and global supply chains.
Crude oil’s rally could stop and prices could average just under $100 this year as economic risks and COVID lockdowns in China make up for supply shortages from the Ukraine war.
