SINGAPORE: Oil prices fell on Friday (Oct 22) with Brent poised for its first weekly dip in seven weeks as demand for oil products in power generation cooled off amid easing coal and gas prices, while a forecast for a mild US winter also weighed on the market.
Brent crude futures dropped 50 cents, or 0.6 per cent, to US$84.11 a barrel at 6.45am GMT (2.45pm, Singapore time), extending a US$1.21 slump in the previous session.
Brent touched a three-year high of US$86.10 on Thursday, but was on track to slip 0.9 per cent in the week, the first weekly dip since Sep 3.
US West Texas Intermediate (WTI) crude futures fell 49 cents, or 0.6 per cent, to US$82.01 a barrel, following a 92-cent loss on Thursday.
"Crude oil has witnessed some correction as part of a sell-off across commodities amid renewed virus concerns and forecast of a milder winter in the United States," said Ravindra Rao, vice president, commodities at Kotak Securities.
Winter weather in much of the United States is expected to be warmer than average, according to a National Oceanic and Atmospheric Administration forecast.
The market hit multi-year highs earlier in the week on worries about coal and gas shortages in China, India and Europe, which spurred fuel-switching to diesel and fuel oil for power.
"Crude oil's sharp rise may make it vulnerable to profit taking, however, a substantial correction may not happen unless global energy crisis subsides," Rao said.
"Global gas and coal prices have eased but concerns persist with tighter market and higher demand winter season around the corner."
US crude found support earlier this week as investors eyed low crude stocks at the major Cushing storage hub in Oklahoma.
"There are clear concerns over the inventory drain that we are seeing at the WTI delivery hub, Cushing," ING commodities strategists said in a note.
US Energy Information Administration data on Wednesday showed crude stocks at Cushing fell to 31.2 million barrels, their lowest level since October 2018.
"In a broader future, oil prices should move higher on its supply and demand relationship, but the bullish sentiment provoked by a surprise draw of US inventory may have been digested," said Leona Liu, analyst at Singapore-based DailyFX.