Oil drops from the 11th week of maximum technical resistance

Oil fell from an 11-week high as traders locked in profits and the commodity’s 200-day moving average again proved a barrier to further advances.

Both West Texas Intermediate and Brent are still heading for their third straight week of gains as supply disruptions in Africa and a reduction in shipments from Russia tightened the market.

WTI futures ended the session around $75 a barrel, up about 2% this week. The US benchmark hasn’t broken above its 200-day mark since August, though futures edged closer in April. Brent settled below $80 a barrel.

“Technicals are driving trade action today as crude is facing significant resistance,” said Rebecca Babin, senior energy trader at CIBC Private Wealth.

Weak refining margins in some parts of the US have also weighed on sentiment, making it harder for prices to break through resistance even as macro signals improve, said Scott Shelton, energy specialist at ICAP.

Still, traders said Friday’s losses are likely temporary, from both a technical and fundamental perspective.

“It might not be a bad thing if prices now consolidate below the 200-day moving average for a few days, to regain some energy and then go higher,” said Fawad Razaqzada, market analyst at StoneX Group .

The rally earlier this week was fueled in part by supply disruptions. Protesters shut down a major Libyan oil field, Sharara, on Thursday afternoon after production from the smaller El Feel field was halted earlier in the day. Meanwhile, flows from the Forcados oil terminal in Nigeria have been suspended to check for a possible leak. This follows signs that Russian flows are finally starting to ease, four months after the country was supposed to cut output.

Traders will closely watch the Federal Reserve’s next move on interest rates, as well as a possible response among G-7 policymakers after Russian crude prices rose above their limit, Arne said Lohmann Rasmussen, Head of Research at A/S Global Risk. Management Ltd.

Prices:

• WTI for August delivery fell $1.47 to settle at $75.42 a barrel
• Brent for September settlement fell $1.49 to settle at $79.87 a barrel.