William Watts, MarketWatch

NEW YORK
EnergiesNet.com 12 27 2022

The U.S. oil benchmark ended near unchanged Tuesday as U.S. refineries temporarily closed last week by a brutal winter storm came back online.

Oil was lifted earlier in the session on optimism about Chinese demand as the country said it would drop quarantine requirements for incoming travelers, and after a brutal U.S. winter storm forced the temporary closure of several Texas refineries.

Also, Russia banned the sale of oil and oil products to countries that participate in a price cap on the country’s crude exports.

Price action

• West Texas Intermediate crude for February delivery CL.1, -0.77%   CL00, -0.78%   CLG23, -0.74% fell 3 cents, or less than 0.1%, to end at $79.53 a barrel on the New York Mercantile Exchange.
  
  
• February Brent crude BRNG23, -0.95%, the global benchmark, rose 41 cents, or 0.5%, to settle at $84.33 a barrel on ICE Futures Europe. March Brent BRN00, -0.60%   BRNH23, -0.63%, the most actively traded contract, rose 18 cents, or 0.2%, to $84.68 a barrel.
  
  
• January gasoline RBF23, -0.53% fell 1% to close at $2.3602 a gallon.
  
  
• January heating oil HOF23, -0.97% rose 2.7% to $3.3537 a gallon.
  
  
• January natural gas NGF23, -6.49% rose 4% to close at $5.282 per million British thermal units.

Market drivers

Winter weather affected facilities responsible for refining more than 3 million barrels a day of crude on the U.S. Gulf Coast Friday, Reuters reported, but facilities were beginning to come back online Tuesday. Some, however, may see shutdowns last into January as a result of damage from freezing temperatures, the report said.

Crude was buoyed in early trade as Russian President Vladimir Putin announced a ban on the sale of oil which would allow exports to countries imposing a price cap only in the case of a special exemption from the Kremlin.

See: Kremlin bans sale of Russian oil to countries that impose price cap

The long awaited move comes after the U.K. and European Union earlier this month banned imports of seaborne crude from Russia and as the EU and Group of Seven imposed a ceiling on Russian crude prices by barring companies from insuring, financing or shipping oil priced above $60 a barrel. Urals crude, Russia’s benchmark, trades at a steep discount to Brent crude, the global benchmark.

Crude oil prices had also found support to begin a holiday-shortened week after China on Monday took a step toward fully reopening the country to travel. U.S. and U.K. markets were closed Monday for Christmas holidays.

The National Health Commission said China would drop a quarantine requirement for passengers arriving from abroad effective Jan. 8. Arriving passengers currently must quarantine for five days at a hotel and then three days at home. Previously, incoming travelers had been required to quarantine as many as three weeks.

Broader loosening of China’s once stringent COVID-19 curbs has provided support for crude, which has bounced off nearly one-year lows set earlier this month. China’s COVID restrictions have been seen curtailing crude demand in 2022.

“Throughout 2022, China’s lockdown measures had often created acute, near-term demand declines, with the recent pivot causing some to increase their demand expectations for 2023,” said Robbie Fraser, manager of global research and analytics at Schneider Electric, in a note.

“Still, recession risk and rising interest rates remain a top concern for crude futures, and the potential for headwinds continues to challenge any attempt by prices to move higher,” he wrote.

marketwatch.com 12 27 2022