• Natural-gas futures drop by more than 14%

Myra P. Saefong and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 03 06 2023

Oil futures settled higher on Monday, giving up early declines, as traders shook off energy-demand concerns tied to the 5% economic growth target set by China’s National People’s Congress.

Price action

• West Texas Intermediate crude for April delivery CL00, -0.39% CL.1, -0.39% CLJ23, -0.39% climbed 78 cents, or 1%, to settle at $80.46 a barrel on the New York Mercantile Exchange. Front-month contract prices, which had touched an intraday low of $78.32, ended the session at their highest since Jan. 26, according to Dow Jones Market Data.
  
  
• May Brent crude BRN00, -0.38% BRNK23, -0.38% rose 35 cents, or 0.4%, to $86.18 a barrel on ICE Futures Europe, the highest finish in three weeks.
  
  
• Back on Nymex, April gasoline RBJ23, -0.42% increased 1.7% to $2.7965 a gallon.
  
  
• April heating oil HOJ23, -0.91% declined 0.9% to $2.8866 a gallon.
  
  
• April natural gas NGJ23, 0.70% dropped 14.5% to $2.572 per million British thermal units, giving back a big chunk of last week’s 18% rally.

Market drivers

Chinese Premier Li Keqiang, the country’s top economic official, on Sunday announced this year’s growth target was “around 5%” following the end of COVID-related controls that kept millions of people at home and triggered protests. The economy grew by only 3% last year, falling well short of the government’s 5.5% target, a miss blamed in large part on lockdowns.

See: Here’s what analysts are saying after China set its growth target at 5%

Oil-market bulls have argued that a surge in demand for crude from China, one of the world’s largest energy consumers, would help drive a rally in 2023.

“Remember, traders were thinking that the fact China has dismantled its COVID-related policies, we are going to see robust demand,” but those expectations were hit today with a dose of reality, said Naeem Aslam, chief investment officer at Zaye Capital Markets, in a note.

Prices for U.S. benchmark WTI oil fell by as much as 1.7% in Monday dealings, but ended the session higher.

Phil Flynn, senior market analyst at the Price Futures Group, told MarketWatch that the market may not be buying the Chinese growth expectation numbers.

“If you look at the surrounding evidence for the Chinese reopening, it’s clear that China most likely is going to aim low so they can exceed expectations.”— Phil Flynn, the Price Futures Group

“I suspect that they’re trying to talk down their growth so they can buy commodities cheaper,” he said. “If you look at the surrounding evidence for the Chinese reopening, it’s clear that China most likely is going to aim low so they can exceed expectations.”

Meanwhile, Robert Yawger, director of energy futures at Mizuho Securities USA, pointed out that Saudi Arabia increased the price of benchmark Arab Light crude oil by 50 cents to $2.50 a barrel above the regional Dubai/Oman benchmark.

That’s the “second month in a row the Saudis have increased the price of their flagship oil in anticipation of increased demand in Asia,” he said in a daily note.  

Oil prices also got a boost following news of a potential military tie and nuclear deal between Russia and Iran.

Geopolitical risks “remain elevated as some uncertainty was thrown into mix after reports that Russia and Iran could foster a secret nuclear deal that could give Iran uranium transfers,” said Edward Moya, senior market analyst at OANDA.

U.S. Defense Secretary Lloyd Austin warned of “unthinkable” military ties developing between Russia and Iran, the Financial Times reported Monday. Separately, over the weekend, Fox News Digital reported that it has learned that Iran allegedly secured secret deals with Russia to guarantee deliveries of uranium.

In other Nymex trading, natural-gas futures marked a sharp drop Monday after finishing last week “on a bearish note,” as March weather outlooks showed the potential for some above-average heating demand mid-month, said Victoria Dircksen, commodity analyst at Schneider Electric, in a daily note.

“However, near-term weather forecasts shifted to more mild temperatures over the weekend,” she said, leading to a big decline for natural-gas prices Monday.

The Associated Press contributed to this report.

marketwatch.com 03 06 20-23