Oil prices trade lower, on track for a weekly drop

Price moves

• West Texas Intermediate crude for March delivery
  CL00,
  -2.32%

  CL.1,
  -2.32%

  CLH24,
  -2.32%
  fell $1.62, or 2.2%, to $72.20 a barrel on the New York Mercantile Exchange, with the contract trading more than 7% lower for the week, FactSet data show.

• April Brent crude
  BRN00,
  -0.21%

  BRNJ24,
  -0.21%,
  the global benchmark, was $1.45 lower, down 1.8%, at $77.25 a barrel on ICE Futures Europe, trading roughly 6.8% lower for the week.

• March gasoline
  RBH24,
  -2.41%
  fell 2.8% to $2.1341 a gallon, eyeing a weekly loss of over 8%, while March heating oil
  HOH24,
  -1.82%
  declined 2.6% to $2.6436 a gallon, on track for a 5.7% weekly loss.

• Natural gas for March delivery
  NGH24,
  +2.15%
  traded at $2.064 per million British thermal units, up 0.7% in Friday dealings, but trading over 5% lower for the week.

Market drivers

WTI and Brent oil futures settled at their highest levels since November on Tuesday, then “faltered” over the course of the week,” said Rob Haworth, senior investment strategy director at U.S. Bank Asset Management.

“Demand concerns are weighing on prices, driving crude oil back to the middle of the winter trading range,” he told MarketWatch. “While U.S. inventories remain low for the season, especially with recent winter weather challenges.”

Markets remain more focused on “global demand patterns” said Haworth. “Still-soft global manufacturing PMIs and weakening news from China are particular headwinds.”

Read: ‘Fear alone is not enough’ to drive oil prices higher. Here’s why.

OPEC+ — the Organization of the Petroleum Exporting Countries and its allies, including Russia — agreed this week to leave its production policy unchanged. Analysts expect the group to decide in March whether to extend output cuts put in place last year for the first quarter.

Meanwhile, traders await retaliatory strikes by the U.S. after a drone attack by an Iran-backed group last weekend killed three U.S. troops in Jordan.

Read: Oil prices fall despite ‘grave escalation’ of Middle East crisis. Here’s why.

The market “is focused on any update on ceasefire talks as well as potential incremental datapoints from the [White House] on more retaliatory strikes,” analysts at Jefferies said in a note.

Looking ahead, Haworth said that in order for oil to break its recent trading range, there would need to be “some significant uptick in global business activity, especially goods trading from China.”

There’s also the question over whether OPEC members “relent on output cuts, perhaps pressuring prices, though any acceleration for U.S. Strategic Petroleum Reserve purchases on lower prices likely limits losses,” he said.

Earlier this week, the U.S. Energy Department announced the new purchase of 3.1 million barrels of oil for the nation’s SPR for delivery in May. It also plans to buy up to another 3 million barrels of oil for delivery in June amid continued efforts to refill the reserve.