- Natural-gas futures lose nearly 4% for the session
Myra P. Saefong and William Watts, MarketWatch
SAN FRANCISCO/NEW YORK
Energiesnet.com 05 01 2023
Oil futures fell Monday, kicking off May with a loss after the U.S. benchmark eked out an April gain to snap a string of five straight monthly declines.
Worries about the potential for central-bank tightening to spark a global slowdown or recession continued to hang over the market, analysts said, ahead of a Federal Reserve policy decision on Wednesday, while data on activity in China’s manufacturing sector disappointed.
Price action
- West Texas Intermediate crude for June delivery CL.1, -1.34% CL00, -1.34% CLM23, -1.34% fell $1.12, or 1.5%, to settle at $75.66 a barrel on the New York Mercantile Exchange after trading as low as $74.53.
- July Brent crude BRN00, 0.15% BRNN23, 0.15%, the global benchmark, lost $1.02, or 1.3%, to close at $79.31 a barrel on ICE Futures Europe.
- Back on Nymex, June gasoline RBM23, +0.98% added 0.8% to $2.55 a gallon.
- June heating oil HOM23, +0.14% edged up by 0.2% to end at $2.38 a gallon.
- June natural gas NGM23, -3.86% dropped 3.8% to $2.32 per million British thermal units after ending Friday’s session up by more than 2%.
Market drivers
The OPEC+ production cuts announced at the beginning of April failed to provide a lasting bounce for crude, with upside capped by worries over the global economic outlook.
China’s official purchasing managers index unexpectedly fell to 49.2 in April from 51.9 in March, according to news reports. A reading below 50 indicates a contraction in activity.
See: China’s economic rebound is wobbling. Here are its strengths and weaknesses.
Meanwhile, investors expected the Federal Reserve to raise its key lending rate by a quarter of a percentage point when it completes a two-day policy meeting on Wednesday.
Also see: Stock-market investors want the Fed to answer this crucial question when it meets this week
The seizure and sale of First Republic Bank FRC, -43.30% on Sunday did not appear to send significant ripples through markets. JPMorgan Chase won an auction to take over the troubled lender, the Federal Deposit Insurance Corp. announced early Monday morning.
The oil rally kicked off in early April by the OPEC+ production cuts ran into stiff resistance at the 200-day moving average for WTI in the second half of the month, leaving crude in a bearish trend, said Alex Kuptsikevich, senior market analyst at FxPro, in a note.
Crude has now dropped back below its 50-day moving average. Oil’s moves near key moving average shows the market tone remains bearish, he said, “with deteriorating macroeconomic conditions.”
That leaves the $65 to $67 a barrel area as an attractive target for bears, Kuptsikevich said, but warned that sellers should remain cautious because a sustained slide in prices would be almost certain to attract OPEC’s attention.
Gains in oil prices on Friday had helped WTI crude eke out an April gain of 1.5%, while Brent suffered a fourth straight monthly decline.
“Now that the widely anticipated gap between the March close and April market open has been ‘filled,’ we can look ahead and assess what to expect next from oil,” analysts at Sevens Report Research wrote in Monday’s newsletter.
Oil’s recent decline saw crude futures fill the gap left on the daily price chart after the OPEC+ production cut announcement in early April — bringing prices back to down to levels seen before the announcement.
“On a longer time frame, economic worries will remain a major headwind for oil in 2023, leaving risks for a collapse to new lows elevated.”— Sevens Report Research
On the charts, the new year-to-date high achieved in mid-April has added a “bullish bias to the market and a rebound back towards $80 is increasingly likely,” the Sevens Report analysts said.
Still, “on a longer time frame, economic worries will remain a major headwind for oil in 2023, leaving risks for a collapse to new lows elevated.”
Also see: Natural gas ‘hysteria’ cools, just as demand is expected to heat up
