Myra P. Saefong and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 01 06 2023

U.S. oil futures finished with a modest gain on Friday, while global benchmark Brent crude declined, leading prices for both oil grades down by more than 8% for the week.

Traders remained concerned about China’s COVID wave and uncertainty over the global economic outlook as central banks continue to tighten monetary policy.

Natural-gas futures ended little changed, failing to recoup a loss of nearly 11% a day earlier that sent prices to their lowest finish in a year.

Price action

• West Texas Intermediate crude for February delivery CL00, +0.07%   CL.1, +0.07%   CLG23, +0.07% rose 10 cents, or 0.1%, to settle at $73.77 a barrel on the New York Mercantile Exchange, with front-month prices logging a weekly loss of 8.1%, according to Dow Jones Market Data.
  
  
• March Brent crude BRN00, +0.04%   BRNH23, +0.04%, the global benchmark, fell 12 cents, or nearly 0.2%, to settle at $78.57 a barrel on ICE Futures Europe, for an 8.5% weekly fall. Brent and WTI marked their first weekly losses in four weeks.
  
  
• Back on Nymex, February gasoline RBG23, -0.58% shed 1% to $2.2446 a gallon, with prices down 9.4% for the week.
  
  
• February heating oil HOG23, +1.31% tacked on 1.1% at $3.0045 a gallon to lose 8.8% for the week.
  
  
• February natural gas NGG23, +1.13% lost a penny, or 0.3%, to finish the session at $3.71 per million British thermal units, down 17.1% for the week and ending at the lowest since Dec. 30, 2021.

Price action

Oil prices were “hit from multiple sides this week, with the U.S. dollar surging higher, natural-gas prices plummeting and continued fears of recession or at the very least — little to no growth weighing on demand expectations,” Troy Vincent, senior market analyst at DTN, told MarketWatch.

“Warm weather and plummeting [natural] gas prices limits expectations of gas-to-oil switching moving through the winter,” he said. Also, “a large batch of refined product export quotas for Chinese refiners issued early this week signals that China is set to continue to draw from product inventories and push more refined products on the global market, without a simultaneous commensurate rise in crude demand.”

For now, “Chinese reopening flights and broader economic and social activity continues to be the biggest bullish risk” for oil, said Vincent. Even so, “there remains significant uncertainty around the timing and scale of normalizing activity levels.”

” Chinese reopening flights and broader economic and social activity continues to be the biggest bullish risk” for oil.— Troy Vincent, DTN

Read: Oil market is ‘underestimating’ this key factor that may lift oil prices above $140 this year, says a top hedge fund manager

Crude-oil prices had tumbled out of the gate to start 2023, plunging nearly 10% in the first two sessions of the year, before bouncing in Thursday’s session. Markets were closed Monday in observance of the New Year’s Day holiday.

“The price slide was sparked by demand concerns amid the latest wave of COVID infections in China following the abrupt lifting of coronavirus restrictions. However, we do not believe that this will set the course for the year as a whole and expect that the oil market will tighten noticeably from midyear at the latest,” said Barbara Lambrecht, commodity analyst at Commerzbank, in a note.

The development of U.S. crude output has disappointed, with prospects repeatedly downgraded in the second half of the year, she noted, with the pre-COVID production high unlikely to be seen by the end of this year. If the Energy Information Administration’s outlook shows the prospect for production growth in 2024 remains subdued, the market is likely to tighten further, she said.

U.S. and global natural-gas prices have plunged, with inventories “in a much better spot than many would have expected in the fall; markets seem well supplied (even Europe seems relatively well supplied) and warmer-than-normal weather across the Northern Hemisphere has pushed demand so low that the price discovery process has seen gas prices fall to below the $4/MMBtu level in the U.S. and to preinvasion levels in Europe,” wrote Christopher Louney, analyst at RBC Capital Markets.

“The price swing, largely due to weather, cannot be understated,” the analyst wrote.

marketwatch.com 01 06 2023