Myra P. Saefong, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 11 17 2022

Oil futures on Thursday tallied back-to-back declines, with U.S. prices ending at their lowest since late September, as China’s zero-COVID policy continued to dull the outlook for energy demand.

Natural-gas futures bucked the downtrend for the energy sector, finishing higher as U.S. government data showed a weekly increase in domestic supplies that generally met with market expectations.

PRICES

• West Texas Intermediate crude for December delivery CL.1, -4.40% CLZ22, -4.39% fell $3.95, or 4.6%, to settle at $81.64 a barrel on the New York Mercantile Exchange. Prices on marked the lowest settlement for a front-month contract since Sept. 30, according to Dow Jones Market Data.
  
  
• January Brent crude  BRN00, 0.10% BRNF23, 0.09% declined by $3.08, or 3.3%, to $89.78 a barrel on ICE Futures Europe, settling at the lowest since Oct. 3.
  
  
• December gasoline  RBZ22, -1.93% lost 2.1% to $2.4547 a gallon.
  
  
• December heating oil HOZ22, -2.38% settled at $3.5248 a gallon, down 2.5%.
  
  
• December natural gas NG00, 2.19%  rose 2.7% at $6.369 per million British thermal units, extending a nearly 2.8% gain from a day earlier.

Market Drivers

Crude oil continued to “drift downward, with demand a bigger area of concern for investors than supply,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.

The recent bounce in oil prices on hopes that China would reduce COVID restrictions has faded “after rule changes turned out to be less than the street had hoped,” he said.

China’s State Council warned cities to avoid “irresponsible loosening” of COVID-19 measures, according to the South China Morning Post. Separately, on Wednesday, The Wall Street Journal reported a sevenfold surge in COVID infections in the past two weeks in China, even as the nation’s new policy of loosened measures aimed at reducing the impact of zero-COVID restrictions.

Elsewhere, “the economy in Europe and other parts of the world continues to struggle and North America, while not as bad off as elsewhere, remains bumpy,” said Cieszynski.

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Overall, “oil markets are stuck in the middle of a tug-of-war on both the supply side and the demand side, which is making prices volatile,” said Stewart Glickman, energy equity analyst and deputy research director at CFRA Research.

“Oil markets are stuck in the middle of a tug-of-war on both the supply side and the demand side, which is making prices volatile.”— Stewart Glickman, CFRA Research

On the supply side, the market wonders how much crude oil is going to come off the market once the Dec. 5 seaborne Russian oil embargo kicks in and whether there will be an effective price cap that allows Russia oil to hit the markets, but at a lower price, he told MarketWatch.

Read: Why the EU ban and G7 price cap on Russian oil won’t guarantee a lasting rally for oil

On the demand side, questions remain over how quickly China is going to re-open its economy in the wake of its COVID-19 restrictions, Glickman said.

He believes both supply and demand are going to go up in 2023, but that demand is likely to outpace supply, and put “upward pressure on oil prices.”

Also see: U.S. drivers are likely to pay highest Thanksgiving gas prices on record

Supply data

In other energy news Thursday, U.S. natural-gas supplies climbed by 64 billion cubic feet for the week ended Nov. 11 to about 3.6 trillion cubic feet, according to data from the Energy Information Administration. That compared with an average analyst forecast for an increase of 62 billion cubic feet, according to a survey conducted by S&P Global Commodity Insights.

Natural-gas futures held onto their gains to finish higher following the data.

“As the seasonal peak in natural-gas storage approaches, inventories have moved to a comfortable level, squarely in the middle of the range for the past five years,” Peter McNally, global sector lead for industrials materials and energy at Third Bridge, told MarketWatch.

The 3.6 trillion cubic feet of natural gas in U.S. storage is “healthy, but from here out, weather becomes one of the key factors to watch as a driver of demand,” he said.  

Oil prices had posted declines on Wednesday, after the EIA said domestic crude inventories fell by 5.4 million barrels for the week ended Nov. 11, but stocks of gasoline and distillates climbed by 2.2 million and 1.1 million barrels, respectively.

marketwatch.com 11 17 2022