Mayra P. Saefond and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 05 24 2024

Oil futures finished higher on Friday, but notched losses for the week as traders noted concerns that the Federal Reserve may keep interest rates elevated for longer than previously anticipated, posing a threat to demand if that causes a sharp economic slowdown.

Price moves

• West Texas Intermediate crude CL00, +1.21% for July delivery CL.1, +1.21% CLN24, +1.21% climbed by 85 cents, or 1.1%, to settle at $77.72 a barrel on the New York Mercantile Exchange, for a 2.3% weekly fall, according to Dow Jones Market Data.
  
  
• July Brent crude BRN00, +0.01% BRNN24, -0.04%, the global benchmark, tacked on 76 cents, or 0.9%, to $82.12 a barrel on ICE Futures Europe, for a 2.2% decline on the week.
  
  
• June gasoline RBM24, +0.90% rose 0.6% to $2.48 a gallon, ending 3.5% lower for the week.
  
  
• June heating oil HOM24, +0.15% added nearly 0.1% to $2.41 a gallon, for a loss weekly loss of 2.9%.
  
  
• Natural gas for June delivery NGM24, -5.80% settled at $2.52 per million British thermal units, down 5.2% for the session to lift its loss to 4%. It settled at its lowest since May 16.

Market drivers

Losses for oil this week seem to be “coming from a lack of conviction among traders based on a lack of clear signals,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.

With traders headed into the three-day holiday weekend in the U.S., it seems like “neither bulls nor bears want to make any kind of a commitment at this point, leaving the market adrift,” he said.

“Some of the political risk premium may still be coming out [of prices], but that could flare up again at any time,” said Cieszynski.

WTI ended at its lowest since Feb. 23 on Thursday, while Brent saw its lowest finish since Feb. 7 as uncertainty over the outlook for monetary policy and jitters over the global demand picture kept pressure on crude.

“The North Sea market is currently awash with light, sweet barrels, which has led the entire complex lower. We see a potential path for the light grades to clean up by midsummer coming out of refinery turnarounds in Europe,” Brian Leisen, analyst at RBC Capital Markets, said in a note. “Until then, we find it hard to get more constructive until we see evidence that cargoes are starting to clear.”

Attention is turning to the Organization of the Petroleum Exporting Countries and its allies — known as OPEC+. The group said Thursday that it will hold a ministerial meeting via videoconference on Sunday, June 2.

Traders are waiting to see if the group will move to extend a full suite of production cuts due to end at the end of June.

After the OPEC+ meeting, the market is likely to renew its focus on demand, Barbara Lambrecht, commodity analyst at Commerzbank, said in a note.

While U.S. gasoline demand had shown some uncharacteristic weakness, it rebounded last week, according to government data, just ahead of the kickoff of summer driving season on Memorial Day weekend in the U.S.

Read: Gasoline demand takes hit from inflation, EVs and fuel efficiency as drivers brace for summer

“If this trend continues in the world’s leading oil consumer country, it should support the medium-term recovery in oil prices that we expect,” Lambrecht wrote.

See: Is the stock market open on Memorial Day? Does the post office deliver mail?

‘Until sentiment and price action changes in crude, it is hard to get bulled up quite yet.’— Kansas City energy team at StoneX

In a Friday newsletter, the Kansas City energy team at StoneX, led by Alex Hodes, said a lot of managed money has left WTI, which is a common theme before the summer.

With PMI’s [purchasing managers’ index data] improving and record-level equities, “there is an expectation that a turn up in economic activity is expected,” they said. However, “until sentiment and price action changes in crude, it is hard to get bulled up quite yet.”

marketwatch.com 05 24 2024