Myra P. Saefong, William Watts/MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 04 06 2023

Oil futures moved a bit higher on Thursday, but ended the holiday-shortened week with a strong gain after Saudi Arabia and its OPEC+ allies last weekend unexpectedly announced a round of production cuts.

Most U.S. markets will be closed for the Good Friday holiday.

Price action

• West Texas Intermediate crude for May delivery CL00, -0.19% CL.1, -0.19% CLK23, -0.19% edged up by 9 cents, or 0.1%, to settle at $80.70 a barrel on the New York Mercantile Exchange, pulling the U.S. benchmark up by nearly 6.7% for the week, according to Dow Jones Market Data.
  
  
• June Brent crude BRN00, -0.21% BRNM23, -0.21%, the global benchmark, settled at $85.12 a barrel, up 13 cents, or nearly 0.2%, for the session, with prices up almost 6.6% for the week.
  
  
• Back on Nymex, May gasoline RBK23, -0.61% fell 0.2% at $2.7888 a gallon, tacking on 4.9% for the week.
  
  
• May heating oil HOK23, -2.58% fell 2.6% to $2.66 a gallon, for a weekly rise of 1.5%.
  
  
• May natural gas NGK23, -5.71% lost 6.7% to $2.01 per million British thermal units, losing more than 9% for the week.

Market drivers

It seems that U.S. benchmark WTI crude “isn’t going to budge from the $80 a barrel level, even as the headlines suggest the U.S. economy is quickly weakening,” said Edward Moya, senior market analyst at OANDA, in a market update.

Crude prices held on to gains scored after Saudi Arabia and a handful of other producers last weekend announced cuts that would collectively take around 1.15 million barrels a day of production off the market beginning in May and running through year-end. Also, Russia said it would extend a cut of 500,000 barrels a day through the end of the year. OPEC+ is made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia.

See: 6 things investors need to know about the surprise OPEC+ production cuts

Late Wednesday, Bloomberg reported that Saudi Arabia hiked official selling prices for all of its oil sales to Asian customers in May, with state-owned Saudi Aramco lifting its selling price for Arab Light crude to Asia by 30 cents a barrel.

“This increase was a sign that Saudi Arabia feels pretty darn confident that they could raise their price for oil despite some concern about the global economy, without any ill effects,” said Phil Flynn, senior market analyst at The Price Futures Group, in a Thursday report. 

Several Wall Street banks have raised oil-price forecasts, though analysts warned that the production cuts could also signal concerns about demand for crude as worries persist about interest rate rises by the Federal Reserve and other major central banks.

“Bottom line, the fundamental dynamics of the oil market changed this week with OPEC+’s announced production cut, which they said was geared towards regaining control of the markets and spooking speculators out of the market,” said analysts at Sevens Report Research, in a Thursday note.

“But it is also possible that OPEC+ foresees a drop in demand amid recessionary pressures and if that turns out to be the case, it will likely be the first of multiple output cuts as global demand would fall sharply in a recession and oil prices would almost certainly follow suit, depending, of course, on the reaction by global producers to easing demand,” they wrote.

Recent downbeat economic data hardly put a dent in oil’s rise this week.

“Weak economic numbers have continued to trickle in, pointing to a slowing U.S. economy,” StoneX’s Kansas City energy team, lead by Alex Hodes, wrote in Thursday’s newsletter, and that suggests a decline in energy demand.

The number of Americans applying for jobless benefits has topped 200,000 for nine weeks in a row, with U.S. government data Thursday showing new jobless claims totaling 228,000 in the seven days ended April 1.

The Institute for Supply Management’s services index, a bellwether of business conditions at U.S. companies, released Wednesday showed a fall to a three-month low of 51.2% in March from 55.1% in February. U.S. private payrolls. meanwhile, climbed by a lower-than-expected 145,000 in March, according to the ADP National Economic report.

The March employment from the U.S. Labor Department will be released Friday, but regular trading of Nymex WTI and Brent oil on ICE Futures will be closed for Good Friday.

Read: Are U.S. markets open on Good Friday?

See also: Why Good Friday complicates how stock-market traders will digest March jobs report

Natural-gas futures, meanwhile, ended lower Thursday after the U.S. Energy Information Administration reported that domestic natural-gas supplies fell by 23 billion cubic feet for the week ended March 31.

That was generally in line with the average decline of 24 billion cubic feet expected by analysts surveyed by S&P Global Commodity Insights, which reported earlier this week that U.S. natural gas faces a “still massive inventory surplus.”

marketwatch.com 04 06 2023