This post was originally published on this site
Oil futures moved higher on Monday, with the U.S. benchmark price moving back above $72 a barrel — the level at which the Biden administration may consider repurchasing oil to refill the nation’s oil reserve.
Worries over the demand outlook for crude had pulled prices down in early dealings, but the continued shutdown of a major North American pipeline and China’s loosening of COVID-19 curbs had helped to limit losses.
Price action
-
West Texas Intermediate crude for January delivery
CL.1,
+4.04%
CL00,
+4.04%
CLF23,
+4.04%
rose $1.78, or 2.5%, to $72.80 a barrel on the New York Mercantile Exchange after trading as low as $70.25. The U.S. benchmark tumbled more than 11% last week, ending Friday at the lowest for a front-month contract since Dec. 20, 2021, according to FactSet. -
February Brent crude
BRN00,
+3.13%
BRNG23,
+3.13% ,
the global benchmark, added $1.40, or 1.8%, to $77.50 a barrel on ICE Futures Europe. Brent ended Friday at the lowest since Dec. 22, 2021, also shedding more than 11% last week. -
Back on Nymex, January gasoline
RBF23,
+1.70%
edged up by 0.4% to $2.0637 a gallon, while January heating oil
HOF23,
+6.23%
rose 4.9% to $2.9308 a gallon. -
January natural gas
NGF23,
+8.05%
jumped 9.5% to $6.839 per million British thermal units.
Market drivers
Oil fell sharply last week, even as a European Union ban on imports of seaborne Russian crude and a Group of Seven price cap on Russian oil took effect and China took steps to ease curbs on activity aimed at containing the spread of COVID-19.
Analysts said crude weakness underlined growing fears of a potential global economic slowdown.
Oil traded lower into the weekend, but the pace of declines “slowed as WTI approached technical support between $70 and $72,” said analysts at Sevens Report Research in Monday’s newsletter. That price range is “fundamentally supported” by the Biden administration’s pledge to buy oil to replenish the Strategic Petroleum Reserve.
President Joe Biden had said in October that the administration would repurchase crude oil for the SPR when prices are at or below about $67-$72, adding to global demand for oil.
Meanwhile, WTI crude has outperformed Brent as investors continue to monitor the shutdown of the Keystone pipeline, following a leak last week that spilled 14,000 barrels of crude in Kansas. The pipeline’s Canadian operator, TC Energy Corp.
TRP,
on Sunday, said the spill remains contained but didn’t offer a timetable for a restart of the pipeline, which carries around 600,000 barrels a day of crude from Canada to Cushing, Oklahoma, where it can connect to another pipeline to the Gulf Coast.
“An expected bumpy China reopening coupled with the scenario of a mild recession in Europe and the U.S. could lead to a harsher economic climate for oil markets. That dominant view is curbing bullish enthusiasm. After all, it was only a matter of time before the same slowdown that haunted stocks most of the year weighed on oil markets,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
Natural gas, meanwhile, was jumping after the latest 6-to-10 day outlook from the National Weather Service’s Climate Prediction Center forecast colder-than-usual weather across much of the U.S., with below-average temperatures likely in the Northern, Western and Central parts of the U.S., said commodity analysts at ING, in a note.
“According to the latest EIA data, U.S. natural gas inventory is around 58 [billion cubic feet] lower than the 5-year average at this point in the season and a stronger demand could tighten the market further in the short term,” they wrote.
