Oil prices retreated on Friday in light volume trading as uncertainties about Europe's plan to tackle its debt problems prompted some profit taking after the previous session's rally. Brent crude managed a small weekly gain, but its bigger losses on Friday dropped it below its 100-day moving average and reduced the premium to US crude to under $17 a barrel after it topped $19 intraday on Thursday.
"After a rally like we saw yesterday it was reasonable to see oil prices fall," Torbjorn Kjus of DnB NOR said. "There was a bit of euphoria yesterday based on the EU meeting and when you look at it (it) wasn't that strong a package. It was a moderate package so it was a little bit surprising to see so much of a rally."
Oil rose on Thursday in a cross-market rally after European governments announced a plan to tackle the region's sovereign debt crisis and after news that the US economy in the third quarter grew at its fastest pace in a year. ICE Brent December crude fell $2.17 to settle at $109.91 a barrel, falling back below the front-month 100-day moving average of $111.46. Brent posted a 35-cent weekly gain, after a 4.5 percent loss in the previous week.
US December crude fell 64 cents to settle at $93.32 a barrel, in choppy trading from $92.01 to $93.93. US crude posted a 6.77 percent weekly gain, biggest percentage gain since the week to February 19. Crude trading volumes remained tepid a second straight day, with both Brent and US volumes under a half million lots traded. Brent was 25 percent under and US 31 percent below their respective 30-day averages. US volumes topped 1 million lots earlier this week.
News that winter storm watches were issued for parts of the Mid-Atlantic and Northeast failed to keep US heating oil futures from a bigger percentage loss than for crude and US gasoline fell more than 2 percent as November refined products contracts approached expiration on Monday.
Oil prices also received pressure from data showing Japan's factory output fell in September for the first time since the March earthquake. This indicated that recovery after the disaster is tailing off in the face of slowing global growth, the strong yen and Europe's problems.
"The markets are now going to react to most all of the macroeconomic data that hits the airwaves much as it did ... when Japanese factory production declined by 4 percent in September," Dominick Chirichella, senior partner at Energy Management Institute in New York, said in a note, emphasising the global manufacturing sector's importance going forward.
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