William Watts , MarketWatch

NEW YORK
EnergiesNet.com 06 07 2022

Oil futures saw choppy trade to start the week, ending slightly lower after pulling back from early gains that saw the U.S. and global benchmarks trade above $120 a barrel after Saudi Arabia raised crude prices.

Natural-gas futures rose sharply, meanwhile, to close at a nearly 14-year high, lifted by seasonally hot U.S. weather forecasts.

Price action

• West Texas Intermediate crude for July delivery CL00, +0.57% CL.1, +0.57% CLN22, +0.57% fell 37 cents, or 0.3%, to settle at $118.50 a barrel on the New York Mercantile Exchange after trading at a session high of $121. WTI on Friday closed at the highest for a most actively traded contract since March 8.
  
• August Brent crude BRN00, +0.50% BRNQ22, +0.50%, the global benchmark, fell 21 cents, or 0.2%, to close at $119.51 a barrel on ICE Futures Europe.
  
• Back on Nymex, July gasoline RBN22, +0.22% fell 1.4% to finish at $4.193 a gallon after closing at a record on Friday.
  
• July heating oil HON22, +0.39% rose 1.9% to $4.3601 a gallon.
  
• July natural gas NGN22, +0.21% jumped 9.4% to end at $9.3220 per million British thermal units, the highest close for a front-month contract since Aug. 1, 2008, according to Dow Jones Market Data.

Market drivers

Saudi Arabia on Sunday raised the official selling price, or OSP, of its Arab light crude to northwest Europe, the Mediterranean and Asia. The move comes after a decision last week by the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, to boost output by 648,000 barrels a day in July and August failed to put a lid on rising crude prices.

OPEC+ had been raising output targets in monthly increments of 432,000 barrels a day as it unwinds cuts implemented after the onset of the COVID-19 pandemic in 2020, but has repeatedly failed to hit them.

The OPEC+ increase was widely characterized as insufficient to make up for expected losses in Russian output in coming months as embargoes and sanctions aimed at the country’s energy exports in response to its invasion of Ukraine take hold.

“The market action since the meeting suggests that participants are unimpressed with the move from OPEC+. The group has failed to hit output targets for months, and this is unlikely to change with the latest increase in targets,” said Warren Patterson, head of commodities strategy at ING, in a note. “Beijing also continues to ease COVID related restrictions, which will be helping sentiment.”

But crude was unable to build on early gains, with some analysts questioning if much upside remains given the strength of recent gains.

“While the broader focus remains weighted to the topside, the immediate advance may be vulnerable in the days ahead as the bulls attempt to mount a seventh consecutive weekly advance,” said Michael Boutros, strategist at DailyFX, in emailed comments.

He sees support on the monthly chart for WTI at $115.26 backed by $111.23.

“Losses would be need to be limited to this threshold IF price is indeed heading higher on this stretch,” he wrote. “Initial resistance now $121.60 with a breach above the yearly high-day close at $124.76 needed to fuel a challenge of the 2008 high-week close at $129.29.”

Natural gas was boosted after NOAA’s 8-to-14-day forecast and 3-to-4-week outlook both predicted hotter-than-normal conditions for most of the South and parts of the western and Midwestern U.S., noted Christin Kelley, senior commodity analyst at Schneider Electric, which would increase cooling demand and boost power generation demand for gas.

“Meanwhile, production remains flat at just over 94 Bcf/d (billion cubic feet a day), while exports remain strong — LNG feedgas demand is trending around 12.6 Bcf/d and pipeline exports to Mexico are averaging 6.2 Bcf/d,” she said.

marketwatch.com 06 06 2022