July 13 (UPI) -- Oil prices lacked clear direction ahead of the start of U.S. trading on Friday as a handful of market watchers said the situation for energy was very volatile.
"Expect more oil price volatility as the global oil market can flip from a global supply surplus to a global supply deficit at the drop of a hat," Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter.
The price for Brent crude oil dropped 6 percent on Wednesday for one of its biggest single-day losses in years. The decline was in response to the return of Libyan oil production after weeks of conflict, lingering concerns about a global trade war and pledges from Russia and Saudi Arabia of more oil on the market in the second half of the year.
Those headwinds, meanwhile, have been offset by concerns about a shortage of spare capacity. Of the major global producers, only Saudi Arabia has the ability to bring millions of barrels to the market in short order.
"The market is trying to assess whether more sources of oil will get us to the point where daily global oil production is once again ahead of our daily consumption," Flynn said. "So far it has not."
The price of oil was moving between small gains and losses ahead of the opening bell in New York. The price for Brent crude oil, the global benchmark for the price of oil, was unchanged from the close as of 9:21 a.m. EDT to $74.45 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.24 percent, trading at $70.50 per barrel.
In its latest monthly market report, the U.S. Energy Information Administration said it expected Brent crude oil would average $73 per barrel during the second half of the year and then dip into the upper $60 range next year. If EIA forecasts are accurate, Brent will hold a $7 per barrel premium to WTI.
An emailed report from Michael Wittner at Société Générale took note of the volatility in crude oil markets. The EIA's report of a drain in U.S. commercial crude oil inventories "was unambiguously bullish," he said, but Brent turned in an "extremely weak" performance on Wednesday.
"The risk for oil is that the trade war eventually weighs on the global economy, which could significantly cut demand growth," he added.
Markets may be cooling on Friday in anticipation of next week's meetings between U.S. President Donald Trump and Russian President Vladimir Putin.
U.S. Energy Secretary Rick Perry met in June with his Russian counterpart, Alexander Novak. Russia is the largest non-member state contributor to a production agreement steered by the Organization of Petroleum Exporting Countries.