Myra P. Saefong and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 03 03 2023

Oil futures erased steep early losses to close higher Friday, bouncing after the United Arab Emirates denied a report that officials were internally debating whether to leave the Organization of the Petroleum Exporting Countries.

Crude posted weekly gains, buoyed by optimism over Chinese demand, though upside was tempered by concerns over shifting expectations for the Federal Reserve and other central banks to lift interest rates higher than previously thought to rein in inflation.

Price action

• West Texas Intermediate crude for April delivery CL.1, +0.23% CL00, +0.23% CLJ23, +0.23% rose $1.52, or 1.9%, to close at $79.68 a barrel on the New York Mercantile Exchange, scoring a 4.4% gain for the week after back-to-back weekly declines.
  
  
• May Brent crude BRN00, +0.20% BRNK23, +0.20%, the global benchmark, gaine d$1.08, or 1.3%, to settle at $85.83 a barrel on ICE Futures Europe, up 3.6% for the week.
  
  
• Back on Nymex, April gasoline RBJ23, +0.20% rose 1.9% to end at $2.7504 a gallon.
  
  
• April heating oil HOJ23, -0.29% gained 1.6% to $2.9131 a gallon.
  
  
• April natural gas NGJ23, +0.23% 8.8% to finish at $3.009 per million British thermal units, logging an 18.1% weekly gain.

Market drivers

Brent fell as low as $82.51 a barrel after a report by The Wall Street Journal detailing strained relations between Saudi Arabia and United Arab Emirates.

The report, citing Emirati officials, said U.A.E. is having an internal debate over leaving the Organization of the Petroleum Exporting Countries. U.A.E. leaders have talked of leaving OPEC for years without taking action, the report said, but recent disagreements with Saudi Arabia have rekindled interest.

The most intense disagreement is over Yemen, where Saudi Arabia and the U.A.E. led an intervention by an Arab military coalition in 2015, the report said. The countries also clashed behind the scenes last year, when OPEC+ — made up of the cartel and its Russia-led allies — agreed to substantially cut crude production over the objections of the Biden administration. While the U.A.E. publicly supported the cut, officials privately told their U.S. counterparts that they wanted to pump more, the report said.

Crude bounced back after Reuters and Bloomberg said unnamed U.A.E. officials had denied that the country was considering leaving OPEC.

Crude logged a third straight winning session Thursday “on overall market optimism over a Chinese economic recovery,” wrote analysts at ING, in a note. Upbeat survey-based data on economic activity in China released earlier this week helped set the tone.

Meanwhile, the price for spot and nearby Brent crude traded at a premium over later futures, a condition known as backwardation, that reflects increased near-term demand, they noted. The spread for the nearby contract over the next month BRNM23, +0.18% hit a three-month high of 66 cents a barrel on Thursday.

At the same time, positive economic data out of the U.S. continues to stoke worries the Federal Reserve will be more aggressive than previously expected in its bid to bring down inflation, raising the threat of a deep economic downturn.

Oil-field-services company Baker Hughes on Friday said the number of U.S. oil rigs fell by 8 this week to 592. That’s up 73 from the same period last year.

Natural gas has fallen sharply in 2023, but was on track for a solid weekly gain.

“Amid a particularly bearish winter, the near-term weather outlook has turned more balanced of late, with the potential for some above-average heating demand midmonth,” said Robbie Fraser, manager of global research and analytics at Schneider Electric in a note. Meanwhile, the warmest parts of the country are beginning to approach temperatures that could trigger some additional cooling demand, he said.

marketwatch.com 03 03 2023