Oil Price Confusion Expected to Continue

NEW YORK (TheStreet) -- Oil prices may be getting pummeled Friday on weak economic data in Europe and China -- but are expected to pop again come Monday.

Brent crude for December delivery was tumbling $1.83 to $100.66 a barrel and November light sweet crude oil futures were slumping $1.50 to $80.64 in the face of a Eurozone debt drama that just won't let up, bad data out of China and Germany -- and on top of that -- swelling Organization of the Petroleum Exporting Countries oil supplies.

In Europe, policymakers were getting closer to passing a proposal to expand the eurozone bailout fund largely to help finance Greece's bailout.

The last two countries to approve the plan were Germany and Estonia on Thursday. However, a more comprehensive plan of possibly levering up the fund to inject capital into the European financial system is still in debate.

This, as the leading Asian and European economies both came out with sets of bad economic data.

China's manufacturing sector shrunk a bit again in September, according to an HSBC index, though this reading was as expected. Meanwhile, German retail sales fell 2.9% in August, the largest decline in four months, according to the Federal Statistics Office.

U.S. economic data was broadly in line with expectations, but could not assuage the bearish tone that had already set into the markets.

The chaotic news cycle is likely to swing back toward the positive next week.

"We are stuck in some sort of parallel universe that plays out as two variations of Groundhog Day," said Matt Smith, an analyst at Summit Energy, a subsidiary of Schneider Electric. "Today," Smith said, "is the Groundhog Day where all things risky sell off because of concerns about the global economy falling back into a recession and on fears of a Greek default ... So just like Monday and Wednesday, crude is selling off with falling equities and a strengthening dollar."

"But do not panic, as the alternate version of Groundhog Day will return on Monday, and markets will rally like a mad thing."

Analysts at Cameron Hanover refer to this market madness as both "confusing and unpleasant."

Fundamentally, a lasting price recovery for oil remains challenged given that there's been a rise in production at the Organization of the Petroleum Exporting Countries (OPEC) -- partly due to a slight expansion of oil supply from Libya, which has not been countered with cutbacks from other member countries, accordingly.

OPEC member countries boosted their oil production in September to 30.25 million barrels a day, its highest level for nearly three years, according to Commerzbank analysts.

"While supply is rising, the signals of demand weakening are increasing," they noted.

Tradition Energy's senior market research director Addison Armstrong says there's rumor on the trading floors that ConocoPhillips (COP) has became the first U.S. oil major to buy Libyan oil, since the start of the civil war in February this year. The company loaded 381,000 barrels of Sarir and Mesla crude onto the tanker, Hellas Warrior, which is set for delivery to France's Mediterranean port of Fos-Lavera, Armstrong says.

ConocoPhillips shares were down 0.5% to $64.02 Friday, while other energy stocks were trading in negative territory. EOG Resources (EOG) was tumbling 3.6% to $71.15; Gulfport Energy (GPOR) was stumbling 2.6% to $25; Apache (APA) was losing 2.3% to $80.94; Anadarko Petroleum (APC) was giving up 2.7% to $65.37; Suncor Energy (SU) was surrendering 2.1% to $26.13; and BP (BP) was falling 1.6% to $36.41.

-- Written by Andrea Tse in New York.



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