Oil prices settle up as Iraq backs more output cuts from OPEC+

Oil prices gained about 2% as Iraq voiced support for OPEC+'s oil cuts ahead of a meeting in two weeks and as some speculators covered massive short positions ahead of weekend uncertainty. Still, prices settled with weekly losses of 4%, their third straight weekly decline.

"This was the perfect technical storm. We came into this week with an almost record short position and now we're seeing some short covering going into the weekend," said Phil Flynn, an analyst at Price Futures Group.

Flynn noted that in addition to Iraq's comments, Saudi Arabia and Russia confirmed this week that they would continue oil output cuts through year end.

In the US, energy firms cut the number of oil rigs operating for a second week in a row to the lowest since January 2022, energy services firm Baker Hughes said. The rig count points to future output. Brent futures rose $1.42, or 1.8%, to settle at $81.43 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.43, or 1.9%, to settle at $77.17.

Brent and WTI notched their third straight weekly losses for the first time since May, although both benchmarks exited technically oversold territory.

"Concerns about demand have replaced the fear of production outages related to the Middle East conflict," analysts at Commerzbank said.

Weak Chinese economic data this week increased worries of faltering demand. Refiners in China, the largest buyer of crude from Saudi Arabia, the world's largest exporter, asked for less supply for December.

US consumer sentiment fell for a fourth straight month in November and households' expectations for inflation rose again.

US Federal Reserve Bank of San Francisco President Mary Daly said she is not ready to say yet whether the Fed is done raising rates, echoing Fed Chair Jerome Powell's comments on Thursday.

Higher interest rates can reduce oil demand by slowing economic growth.

In Britain, the stagnating economy failed to grow in the July-to-September period but did avoid a recession, according to the UK's Office for National Statistics.

UPCOMING OPEC MEETING

OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, will meet on Nov. 26.

Iraq's oil ministry said Baghdad is committed to the OPEC+ agreement on determining production levels.

Chances Saudi Arabia will extend its output cut into the first quarter of 2024 "is certainly increasing given renewed market concerns about Chinese demand and the broader macro outlook," RBC Capital Markets analyst Helima Croft said.

Analysts at Capital Economics said OPEC+ might cut supply further if prices continue to fall.

"We are sticking with our forecast of Brent ending both this year and next year at around $85 per barrel," the research firm said in the note.