Myra P. Saefong and William Watts, MarketWatch
SAN FRANCISCO/NEW YORK
Energiesnet.com 04 28 2023
Oil futures finished sharply higher on Friday, prompting U.S. prices to turn higher for the month of April, buoyed by expectations for tighter supplies.
Speculation over a potential rescue for troubled First Republic Bank also supported prices, as banking issues have weighed on the economic outlook and in turn, the prospects for energy demand.
Price action
- West Texas Intermediate crude for June delivery CL.1, -1.32% CL00, -1.30% CLM23, -1.30% rose $2.02, or 2.7%, to settle at $76.78 a barrel on the New York Mercantile Exchange. That left the front-month U.S. benchmark down 1.4% for the week, but up 1.5% for the month after five consecutive months of declines, according to Dow Jones Market Data.
- June Brent crude BRNM23, the global benchmark, rose $1.17, or 1.5%, to $79.54 a barrel, leaving it down 0.3% for the month, on the contract’s expiration day. July Brent BRN00, 0.14% BRNN23, 0.14%, the new front-month contract, gained $2.11, or 2.7%, to settle at $80.33 a barrel.
- May gasoline RBK23 rose 1.8% to $2.58 a gallon, with prices down 4.5% for the month.
- May heating oil HOK23 ticked up 1% to $2.38 a gallon, losing over 11% for the month. The May oil product contracts expired at the end of the session.
- June natural gas NGM23, -4.27% added 2.3% to $2.41 per million British thermal units, posting a monthly gain of nearly 8.8%.
Price action
A monthly report from the Energy Information Administration showing that U.S. petroleum demand hit the highest level since November 2022, while production fell to the lowest since December 2022, gave the oil market a boost, Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
Exxon’s chief executive officer also reportedly said that he expects higher prices and that gasoline demand looks reasonable, said Flynn, so the “weak demand mantra isn’t holding water” on Friday.
The other news was speculation of a bailout for First Republic Bank, which is one of the reasons why oil was so weak, Flynn said. “If that happens, the odds of the Federal Reserve raising interest rates goes down a bit and that should support oil.”
Also read: Natural gas ‘hysteria’ cools, just as demand is expected to heat up
This week, crude futures this week filled the gap left on the daily price chart early this month after Saudi Arabia and its OPEC+ allies announced 1.15 million barrels in additional production cuts beginning in May running through year-end, with Russia pledging to extend a 500,000 barrel-a-day cut through the rest of 2023.
While 1.15 million barrels-a-day in cuts are set to kick in next week, it’s “ unlikely to push prices up again immediately,” said Barbara Lambrecht, commodity analyst at Commerzbank, in a note.
“After all, the high Russian oil export figures are raising doubts about whether Russia has really reduced its production so far by as much as it had announced. And for another thing, considerable concerns about demand are likely to remain given that sentiment indicators in neither the U.S. nor China will probably be able to dispel them,” she wrote.
Naeem Aslam, chief investment officer at Zaye Capital Markets, pointed out that the U.S. GDP data came in weaker than expected and the Fed is likely going to increase interest rates further at its meeting next week. “This means that economic growth will slow even further,” he told MarketWatch.
Even so, traders should be “very careful” if they believe oil prices will decline because OPEC “isn’t going to allow another rout,” said Aslam.
Taking a look at the bigger picture, oil prices had dropped in March from the low $80’s to the low $70’s on the banking crisis which “raised concerns about global growth,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management.
During April, oil recovered to the $80 range, mostly due to OPEC+’s surprise production cut announced in early April, he said.
Infrastructure Capital Management forecasts a trading range of $75 to $95 for oil prices this year as the commodity is “supported by the reopening of China, strong demand for travel driven by lower prices, and continued production restraint from OPEC+,” said Hatfield.
marketwatch.com 04 28 2023
