Oil prices posted their first weekly losses in a month as investors held out for signs that global crude supplies are tightening, and many anticipated that Tropical Storm Nate would curb refiners' demand for crude.
Prices fell Friday. U.S. crude futures dropped $1.50, or 2.95%, to $49.29 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.38, or 2.42%, to $55.62 a barrel on ICE Futures Europe.
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The U.S. benchmark ended the week down 4.61%--snapping a four-week streak of gains and posting its largest weekly decline since early May. Brent ended the week down 2.06% and snapped a five-week streak of gains.
Tropical Storm Nate, which formed in Central America, is forecast to strengthen into a hurricane and reach the U.S. Gulf Coast by Sunday morning, according to the National Hurricane Center. Nate is currently heading toward New Orleans, where it is expected to bring gusty winds, heavy rains and storm surge.
The Bureau of Safety and Environmental Enforcement said that offshore platforms and rigs in the Gulf of Mexico were being evacuated as the disturbance approached. As of Friday afternoon, some 71.1% of Gulf of Mexico production was shut in -- that is up from less than 15% Thursday.
But market participants focused more on the storm's potential impact on refiners. As with Hurricane Harvey in August, the "tendency is for the focus to be more on refinery shutdowns, which is probably more positive for product prices and probably a little bearish for crude prices," said Richard Mallinson, an analyst at consultancy Energy Aspects.
Phillips 66 said it is preparing to shut down its 247,000 barrel-a-day refinery in Belle Chasse, La. Other refiners said they are monitoring the storm.
Still, some analysts said Nate isn't likely to have as dramatic an impact as Harvey, which took as much as a quarter of U.S. refining capacity offline.
"The good news is the storm is moving relatively quickly, meaning rain forecasts are roughly 10% of what we saw with Harvey," analysts at TAC Energy wrote in a client note.
The storm is approaching at a moment when oil markets already have been vulnerable to a selloff, said John Saucer, vice president of research and analysis at Mobius Risk Group. U.S. crude futures hit a five-month high last week but haven't made significant gains since.
"We had a big rally and didn't follow through -- the market may be more receptive to negative news," Mr. Saucer said.
The move reversed gains Thursday after Saudi Arabia's King Salman and Russian President Vladimir Putin met Moscow and discussed extending Russia's participation in a pact with the Organization of the Petroleum Exporting Countries to curtail output.
"You had a lot of emotion on the headlines Thursday," said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy trading desk. "When you took the apron off and looked into the real numbers, it was all headlines and there was nothing really supportive today -- they gave it all back."
The original deal, struck nearly a year ago between OPEC and 10 other non-OPEC countries, was to cut production by 1.8 million barrels a day for six months. The agreement was extended in May of this year to continue through the first quarter of 2018.
Gasoline futures fell 5.26 cents, or 3.26%, to $1.5588 a gallon. Diesel futures fell 4.24 cents, or 2.37%, to $1.7439 a gallon.
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(END) Dow Jones Newswires
October 06, 2017 16:34 ET (20:34 GMT)