Mayra P. Saefond and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 01 25 2024

Oil futures rose Thursday to settle at their highest prices since late November after government data showed larger-than-anticipated drops in U.S. crude inventories and production.

Price moves

• West Texas Intermediate crude for March delivery CL00, -0.56% CL.1, -0.56% CLH24, -0.56% rose $2.27, or 3%, to settle at $77.36 a barrel on the New York Mercantile Exchange.
  
  
• March Brent crude BRN00, -0.41% BRNH24, -0.30%, the global benchmark, climbed $2.39, or 3%, at $82.43 a barrel on ICE Futures Europe. Brent and WTI oil settled at their highest levels since late November, according to Dow Jones Market Data.
  
  
• February gasoline RBG24, -1.06% added 2.5% to $2.26 a gallon
  
  
• February heating oil HOG24, -0.50% rose 4.2% to $2.80 a gallon.
  
  
• Natural gas for February delivery NGG24, 2.88% settled at $2.57 per million British thermal units, down nearly 2.7%.

Oil market drivers

“News flow this week has been almost universally bullish for oil prices, and were seeing futures begin to meaningfully rally for the first time in months,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

Oil was building on gains scored in the previous session after the Energy Information Administration on Wednesday reported a much larger than expected drop in U.S. crude inventories of 9.2 million barrels in the week ended Jan. 19.

The agency also reported that U.S. crude output dropped by 1 million barrels a day (mbd), to 12.3 mbd last week, pulling back from record output the previous week.

Oil production fell to a six-month low, said Richey, due to freezing temperatures in the northern U.S.

Read: Oil traders care more about North Dakota weather than Red Sea missile attacks

Overseas, Ukrainian forces have ramped up attacks on Russian oil and gas infrastructure, “disrupting export operations [and] lowering available oil supply globally,” he said. In the Middle East, attacks on ships in the Red Sea by Yemen’s Houthi rebels continue to “interfere with global shipping routes, including seaborn crude-oil cargoes.”

The increasingly “backwardated nature of the oil-futures market has offered a real-time read of the increasing concern about an emerging supply deficit in the global oil market,” said Richey. Backwardation means that oil prices in the spot market are higher than those for later deliveries.

Also see: Uranium prices have quadrupled. So why are mining stocks lagging? 

The EIA on Wednesday also said gasoline inventories rose 4.9 million barrels while gasoline supplied, a measure of demand, dropped 388,000 barrels a day to 7.88 mbd in the latest week, a one-year low.

The four-week moving average of gasoline supplied indicates “a meaningful drop-off in demand in recent weeks,” according to Richey. “The weak demand could be due to the adverse weather, but it also may be due to prices creeping higher again [and] a deterioration in the health of the consumer.”

Data released Thursday showed that the U.S. economy grew at a robust 3% annual pace in the fourth quarter. That was better than the 2% rate of growth forecast by economists polled by the Wall Street Journal.

For oil, this report shows that “U.S. growth is very positive despite [interest-rate] rate hikes, which is supportive of demand from the United States,” said Jason Schenker, president and chief economist at Prestige Economics.

Natural-gas supplies

Natural-gas prices on Nymex on Thursday ended with a loss, even after the EIA reported that U.S. supplies of the commodity in storage dropped by 326 billion cubic feet for the week ended Jan. 19.

The weekly decline matched the average fall forecast by analysts polled by S&P Global Commodity Insights.

Read: Why natural-gas prices are falling despite the largest supply drop in 3 years

U.S. supplies remained well above the year-ago and five-year average levels, EIA data showed.

marketwatch.com 01 25 2024