Myra P. Saefong and William Watts, MarketWatch
SAN FRANCISCO/NEW YORK
EnergiesNet.com 02 28 2023
Oil futures finished at their highest in more than a week on Tuesday, underpinned by optimism over demand from China, but booked losses for month of February.
Price action
- West Texas Intermediate crude for April delivery CL.1, 0.86% CL00, 0.84% CLJ23, +0.62% rose $1.37, or 1.8%, to settle at $77.05 a barrel on the New York Mercantile Exchange, the highest finish for front-month contract since Feb. 16, according to Dow Jones Market Data. For the month, prices lost 2.3%, down a fourth month in a row.
- April Brent crude BRNJ23, +1.72%, the global benchmark, gained $1.44, or nearly 1.8%, to settle at $83.89 a barrel on ICE Futures Europe on the contract’s expiration day, with prices down 0.7% for the month. May Brent BRN00, +0.64% BRNK23, +0.64%, the new front-month contract, climbed $1.41, or 1.7%, to $83.45 a barrel.
- Back on Nymex, March gasoline RBH23, +2.48% added 2.8% to $2.4343 a gallon, losing 4.3% for the month.
- March heating oil HOH23, +0.11% ended little changed at $2.8209 a gallon, posting a loss of more than 11% for February. The March contracts expired at the session’s end.
- April natural gas NGJ23, 0.36% rose 0.6% to $2.747 per million British thermal units, ending nearly 2.4% higher for the month.
Market drivers
Both WTI and Brent crude registered declines for the month.
“Oil prices have fallen for the month due to an extremely warm winter in the U.S. and Europe,” Jay Hatfield, chief executive officer at Infrastructure Capital Management, told MarketWatch. “In addition, recent mixed data on inflation and associated hawkish [Federal Reserve] commentary have been a headwind for oil as the dollar strengthened and stock prices came off of highs.”
Still, crude has been stuck in a trading range since December, with WTI trading between a bottom near $70 and highs just above $80 a barrel.
Investors continue to weigh the outlook for demand from China as that country reopens from COVID restrictions that had crimped demand from one of the world’s largest energy consumers.
Meanwhile, Russia has moved to cut production and limit exports in response to new rounds of price caps and sanctions imposed by Western nations after its invasion of Ukraine just over a year ago. Russia unexpectedly halted flows of oil to Poland via the Druzhba pipeline over the weekend, news reports said.
Read: The real impact of Russia’s invasion of Ukraine on commodities
“Oil could surely rally given the right headlines, but beyond the near term the most- likely path of least resistance is lower for oil in 2023 as the threat of recession looms,” analysts at Sevens Report Research wrote in Tuesday’s newsletter.
Overhanging the market is uncertainty around the global economic outlook as the Federal Reserve and other major central banks continue to push interest rates higher in a bid to rein in inflation.
“The barrel of American crude remained offered into the $75 [a barrel level] yesterday, as oil bears remain in charge of the market at the current levels,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.
“But solid support is expected before the $70 [per barrel] level, as — like it or not — the global oil supply remains tight, China reopens, demand increases and Americans will have to refill their reserves,” the analyst said.
The U.S. last year drained 180 million barrels from the Strategic Petroleum Reserve as part of an effort to combat a jump in prices after Russia’s invasion of Ukraine. The U.S. government earlier this month said it would follow through with a plan to sell another 26 million barrels of crude from the reserve.
Monthly data from the Energy Information Administration released Tuesday show that U.S. crude-oil production was at 12.101 million barrels a day in December, down from 12.377 million barrels a day in November.
The EIA lowered its estimates for U.S. production, suggesting that it may have previously overestimated output, said Phil Flynn, senior market analyst at the Price Futures Group. That “should be bullish for crude,” he said.
On Wednesday, the EIA will issue its weekly data on U.S. petroleum supplies.
On average, analysts forecast a climb of 350,000 barrels in crude inventories for the week ending Feb. 24, according to survey conducted by S&P Global Commodity Insights. They also forecast supply declines of 300,000 barrels for gasoline and of 700,000 barrels for distillates.
marketwatch.com 02 28 2023
