June 17, 2024
Oil futures rise but U.S. prices on track for a 5th straight monthly decline

Oil futures rise but U.S. prices on track for a 5th straight monthly decline

Oil futures climbed on Friday, with prices holding ground at their highest levels since mid-March, but that wasn’t enough to ameliorate losses for the month and quarter.

Price action
  • West Texas Intermediate crude for May delivery  CL00, +1.53% CLK23, +1.53% CL.1, +1.53% rose 66 cents , or 0.9%, to $75.03 a barrel on the New York Mercantile Exchange. Front-month prices, which traded at their highest since March 13, were poised for a monthly loss of nearly 3% and a quarterly decline of almost 7%, FactSet data show.
  • May Brent crude  BRN00, +1.40%   BRNK23, +0.56%  , the global benchmark, rose 28 cents, or 0.4%, to $79.55 a barrel on ICE Futures Europe. Prices looked to mark another finish at their highest since March 13, trading almost 5% lower for the month and nearly 7% lower for the quarter.
  • April gasoline  RBJ23, +2.20% added 1% to $2.6885 per gallon, while April heating oil HOJ23, +1.31% rose 0.4% to $2.6331 a gallon. The April contracts expire at the end of Friday’s session.
  • May natural gas  NGK23, +4.90% rose 3.9% to $2.187 per million British thermal units, eyeing a loss of nearly 24% for March and a first-quarter drop of over 44%.
Market drivers

U.S. crude prices have rallied by around 8% this week, helped by such factors as supply problems out of Northern Iraq, U.S. dollar weakness, a hefty weekly drop in U.S. crude inventories and improved risk sentiment, along with signs of China’s economic recovery, Ole Hansen, head of commodity strategy at Saxo Bank, said in a note to clients.

Concerns about the banking crisis in the U.S. and Europe have also eased, allowing oil prices to recover somewhat, as fears of a financial crisis that could have a major impact on the economy and oil demand subsided, said Matthew Sherwood, senior Europe and lead commodities analyst at The Economist Intelligence Unit (EIU). That prompted prices for WTI to trade more than 8% higher for the week, and Brent to move up 6% from the week-ago settlement.

Still, a fall for the month for crude prices would mark the fifth in a row.

“Investors continue to assess the long-term implications of turmoil in Western banking systems,” said Sherwood, adding that EIU believes that “recession risks have increased, as banking lending standards will tighten further in the wake of SVB and Credit Suisse.”

Even so, the oil market still remains tight and we expect Brent to head above $80 a barrel and even approach $90 by the middle of the year as “demand continues to recover in China and the supply response remains muted,” especially in the Organization of the Petroleum Exporting Countries, he said.

OPEC and its allies, a group known as OPEC+, will hold a committee meeting Monday, as it does every two months, to review the oil market.

Read: OPEC+ committee is set to review an oil market plagued by concerns over the banking crisis and a recession

Meanwhile, natural-gas futures moved higher Friday, but the rise does little to offset the significant price losses for the month and quarter, after recently dropping to their lowest in two-and-a-half years.

“Europe is the big story here. European natural gas storage is currently at about 56% of capacity, a historically high level for this time of year,” said EIU’s Sherwood. “An unseasonably warm 2022/23 winter means that European stocks remained much higher than expected through the winter and reduced the amount that needs to be topped up over the summer as Europe prepares for the 2023/24 winter.”

The developments in Europe have had a knock-on impact on U.S. Henry Hub natural-gas prices, and a  “weather-related slump in U.S. natural-gas demand also played a major role in the sharp fall for U.S. prices in the first quarter, he said.


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