William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 04 18 2023

A stronger-than-expected first-quarter rebound by China’s economy provided little support for oil futures, which ended Tuesday’s session only modestly higher, as traders continued to fret over the threat of a sharp U.S. and global economic slowdown.

Price action

• West Texas Intermediate crude for May delivery CL00, -1.98% CL.1, -1.99% CLK23, -1.99% rose 3 cents, or less than 0.1%, to settle at $80.86 a barrel on the New York Mercantile Exchange after losing nearly 2.1% Monday.
  
  
• June Brent crude BRN00, -2.01% BRNM23, -2.01%, the global benchmark, added a penny to finish at $84.77 a barrel on ICE Futures Europe.
• Back on Nymex, May gasoline RBK23, -1.93% fell 0.8% to $2.75 a gallon.
  
• May heating oil HOK23, -1.40% settled at $2.60 a gallon, down 0.6%.
  
  
• May natural gas NGK23, -1.65% rose 4% to $2.37 per million British thermal units.

Market drivers

The recent runup in oil prices “due to the OPEC+ [output] cutbacks, and then the bullish IEA report, have left the market seeking direction,” said Michael Lynch, president of Strategic Energy & Economic Research.

In a report released Friday, the International Energy Agency said the oil market will fall into a much larger oil deficit far sooner than expected, following the unexpected output cut announcement by major oil producers known as OPEC+ in early April.

Also, news from China, the weaker U.S. dollar, and inflation fears are “pushing prices around but no firm trend as a result,” Lynch told MarketWatch.

“News from China, the weaker dollar, inflation fears are pushing prices around but no firm trend as a result.”— Michael Lynch, Strategic Energy & Economic Research

Oil was lifted during Asian trading hours after data showed China’s gross domestic product grew 4.5% year over year in the first quarter of the year. Economists surveyed by The Wall Street Journal had looked for growth of 4%.Crude Oil WTI (NYM $/bbl) Front MonthSource: FactSet2023April65.067.570.072.575.077.580.082.5$85.0

In March, total retail sales of consumer goods rose 10.6% year over year, and grew 7.1 percentage points compared with the first two months of the year. Industrial production output, which measures activity in the manufacturing, mining and utilities sectors, grew by 3.9% in March compared with the same time last year.

Still, a key German investor sentiment survey weighed on crude, “as optimism for the eurozone’s largest economy remains downbeat in the coming quarters,” said Edward Moya, senior market analyst at OANDA, in a market update. The ZEW economic research institute said Tuesday that its index of economic expectations for Germany fell to 4.1 in April from 13.0 in March.

Looking ahead, economic data will be in focus as a “strong economic recovery in China and the avoidance of hard landings in Europe and the U.S. are both priced into the market with WTI trading with an $80 handle,” said analysts at Sevens Report Research in Tuesday’s newsletter.

So, while the path toward new year-to-date highs in WTI is narrow, it is “possible,” they said. “Growth data in the U.S. and Europe will need to be Goldilocks while
better-than-expected data from China would be a welcomed surprise.”

The Energy Information Administration will release its weekly U.S. petroleum supply report Wednesday morning.

marketwatch.com 04 18 2023