Natural gas scores a nearly 13% weekly rise

Myra P. Saefong and Williams Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 11 04 2022

Oil futures rose Friday, with U.S. prices topping $90 a barrel to finish at their highest in a month, as market bulls weighed signs that China may soon move to ease COVID restrictions and allow economic growth to revive.

Price action

• West Texas Intermediate crude for December delivery CL.1, -0.01% CL00, -0.01% CLZ22, -0.01% rose $4.44, or 5%, to settle at $92.61 a barrel, for a weekly gain of 5.4%, according to Dow Jones Market Data. The settlement was the highest for a front-month contract since Oct. 7.
  
  
• January Brent crude BRN00, +0.18% BRNF23, +0.18%, the global benchmark, gained $3.90, or 4.1%, to $98.57 a barrel on ICE Futures Europe. Prices marked a weekly rise of 5.1% and their highest finish since Aug. 30.
  
  
• Back on Nymex, December gasoline RBZ22, +0.22% rose 1.5% to $2.7348 a gallon, up 6.7% for the week.
  
  
• December heating oil HOZ22, -0.54% gained 1.3% to $3.9148 a gallon, for a 4.5% weekly advance.
  
  
• December natural gas NGZ22, +0.92% gained 7.1% to settle at $6.40 per million British thermal units after a volatile trading session that saw prices also fall to as low as $5.893. Prices booked a weekly gain of 12.6%.

Market drivers

Ongoing speculation around an easing of COVID-19 curbs in China provided support for crude.

A lot of “China-sensitive markets” started to rally overnight on reports of potential re-openings, including oil, copper HGZ22, +0.38% and the Hang Seng HSI, +5.36% which spiked up over 5%, Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.

The Wall Street Journal reported Friday that Zeng Guang, who was formerly the chief scientist at the Chinese Center for Disease Control and Prevention, said at a conference that there were expected to be “significant” changes to the country’s zero-COVID approach in 2023, according to multiple unnamed sources.

Related: Alibaba, JD.com, Nio extend rally in Chinese stocks amid continued hope for relaxing COVID rules

China’s COVID-zero policies of stringent lockdowns and other curbs have been seen as keeping a lid on crude prices in 2022.

Oil prices found support as “traders ultimately think of China more as a driver of upside to demand at some point next year when the reopening of the economy accelerates rather than as a current incremental driver of demand weakness. In other words, the light at the end of the COVID-zero tunnel is more attractive than today’s gloomy outlook,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

See also: China aiming for less disruptive COVID policies, reports say

Commodities then got another boost as the U.S. dollar began to “backslide, removing a big headwind for dollar-denominated commodity prices, after the U.S. employment report,” Cieszynski said. A decline from last month in U.S. hourly wage growth suggests that “hawkish pressure from a key component of inflation may be backing off.”

Meanwhile, the Journal reported that the U.S. and its allies had reached an agreement on which types of oil sales will be subject to a cap on Russian prices when new sanctions taking effect on Dec. 5.

Seaborne Russian oil will only be subject to the cap when its first sold to buyers on land, the report said, meaning resales won’t fall under the same cap. Intermediary trades of Russian oil that occur at sea would remain subject to the cap, while refined products, such as gasoline, would not.

“In the past, Russia has issued warnings that it would not seek to comply with any artificial price cap, and would be willing to instead cut production and exports,” said Robbie Fraser, manager, global research & analytics at Schneider Electric, in a daily note.

“That risks tipping the market well into undersupplied territory even as storage levels remain low,” he said.

marketwatch.com 11 04 2022