Oil ends down 1 percent, snapping week-long OPEC-fueled rally

Fri Oct 7, 2016 3:43pm EDT
 
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By Barani Krishnan

NEW YORK (Reuters) - Oil fell about 1 percent on Friday as players took profits on a rally over the past week that propelled prices nearly 15 percent to four-month highs on hopes of OPEC crude output cuts.

Also weighing on the market was the steady rise in U.S. oil drilling as crude trades at or near $50 a barrel. A closely watched report by oil services provider Baker Hughes showed U.S. drillers adding rigs in 14 of the past 15 weeks. [RIG/U]

Brent crude LCOc1 settled down 58 cents, or 1.1 percent, at $51.93 a barrel. Earlier in the day, it hit $52.84 cents, three cents short of a one-year high.

U.S. West Texas Intermediate (WTI) crude settled down 63 cents, or 1.3 percent, at $49.81.

OPEC is "back in business," determining oil prices, and only a "brave person" would bet against the cartel, an avowed oil bull, Andy Hall, said in a letter seen by Reuters to investors in his $2.5 billion hedge fund Astenbeck.

Despite Friday's drop, Brent and WTI remain up more than 10 percent since the Organization of the Petroleum Exporting Countries wrong-footed many market participants eight days ago with its first production cut plan in eight years. For the week, Brent ended up 6 percent while WTI rose 3 percent.

But with prices appearing to have gained too much, too soon - the Relative Strength Index for Brent and WTI was at 69 on Thursday, just below the overbought level of 70 - there was pressure to liquidate. On Friday, Brent's RSI fell to 67 while WTI dropped below 58.

"This is certainly not a one-way trade and we're seeing the other side acting now," said Tariq Zahir at Tyche Capital Advisors in New York.   Continued...

 
Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford