Oil prices bounce on Nigeria attacks, but weekly decline in prospect

Crude prices bounced back on Friday from two-month lows hit in the previous session, but benchmark Brent was in line for its largest weekly decline since January as bearish economic indicators weighed on oil.

Prices have gyrated as a glut of refined products and slowing economic growth contrasted with supply disruptions and expectations that the world’s overhang of crude would soon begin to recede.

Brent crude futures were trading at $46.88 per barrel at 1202 GMT, up 48 cents from their previous settlement. U.S. crude was up 46 cents at $45.60 a barrel.

Still, Brent and U.S. crude were heading for weekly losses of roughly 7 percent, their deepest declines since January and February respectively.

“It could well be that a down cycle on oil’s own fundamentals is now starting,” JBC analysts said in a note.

Prices regained ground on Friday as Nigerian militants launched fresh attacks on oil installations in the country’s oil-rich Delta region.

The Niger Delta Avengers militants claimed an attack on the Nembe Creek Trunk Line, which carries Bonny Light crude exports to port, while attackers also bloew up an oil pipeline operated by a subsidiary of Italy’s Eni.

Even before the attacks, prices had been regaining some of the ground lost during the previous day’s 5 percent drop on news that a U.S. weekly crude draw was lower than many analysts had expected.

Some said the price fall had been an overreaction because crude stocks had dropped for almost two months straight and U.S. production had fallen by 12.3 percent since 2015 peaks.

“Declining U.S. production is contributing hugely to the tightening of global supply, which is reduced in any case because of high production outages in OPEC countries,” Commerzbank analyst Carsten Fritsch said.

Still, the outlook appeared volatile. Tanks are filled with oil products while economic worries have created concern over demand growth.

Data on Friday showed that German exports in May suffered their steepest monthly decline for nine months in a further sign that weak global demand is curbing growth in Europe’s largest economy.

“While we are bullish for next year, we continue to be cautious for the rest of this year,” Societe Generale oil analyst Michael Wittner said.

“For the time being, the path of least resistance for oil prices is lower.”