Myra P. Saefong and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 01 13 2023

Oil futures on Friday posted a gain of more than 8% for the week, supported by optimism over demand from China as the country lifts its strict COVID-19 curbs and reopens its economy.

Price action

• West Texas Intermediate crude for February delivery CL00, 2.09% CL.1, 2.09% CLG23, 2.08% rose $1.47, or 1.9%, to settle at $79.86 a barrel on the New York Mercantile Exchange, up 8.3% for the week, according to Dow Jones Market Data.
  
  
• March Brent crude BRN00, 0.21% BRNH23, 0.19%, the global benchmark, added $1.25, or 1.5%, at $85.28 a barrel on ICE Futures Europe, for a 8.5% weekly advance. Brent, as well as WTI, saw their highest settlements since Dec. 30.
  
  
• Back on Nymex, February gasoline RBG23, 2.55% rose 2.3% to $2.5328 a gallon, for a weekly rise of 12.8%.
  
  
• February heating oil HOG23, 1.49% added nearly 1.2% to $3.2559 a gallon, tacking on 8.4% for the week.
  
  
• February natural gas NGG23, -5.93% fell 7.5% to settle at $3.419 per million British thermal units, ending 7.8% lower for the week.

Market drivers

China’s economic reopening was the “top mover for oil this week,” but improved inflation data also made people more “optimistic about the U.S. economy either heading for a soft landing or a mild recession,” Michael Lynch, president of Strategic Energy & Economic Research, told MarketWatch.

The weaker dollar is also likely a “minor factor moving prices up,” he said.

This week’s move higher for oil erased the previous week’s steep slide.

Trading volume has climbed on expectations of “record-breaking Chinese oil demand, as well as expectations that the Fed will only raise rates by a quarter point in February,” giving signs of easing inflation in the CPI data, said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report.

U.S. data released Thursday showed the annual rate of inflation fell for the sixth month in a row to 6.5% from 7.1%, or the lowest level in more than a year.

In a note, Michael Tran, energy market strategist at RBC Capital Markets, said, “while early, there is already indication suggesting that the Chinese consumption machine” is ramping up.

China’s December crude imports came in at 10.9 million barrels a day, up 830,000 barrels a day from the previous 11 months of 2022, he said, while satellite imaging indicators suggest that crude inventories have been steady over recent weeks, but down around 30 million barrels from the summer 2022 peak.

“Given the focus on energy security, we anticipate that Chinese imports will continue to pick up, particularly as refinery runs ramp [up] and stockpiling crude remains a strategic priority,” Tran wrote.

Also read: Why natural-gas prices dropped to their lowest in a year

Back in the U.S., Baker Hughes BKR, +0.41% on Friday reported that the number of active U.S. rigs drilling for oil rose by five to 623 this week. That followed a decline of three in the previous week.

marketwatch.com 01 13 2023