Oil futures ended Tuesday at their highest in more than two weeks, with analysts attributing the rise to strength in Chinese energy demand, easing concerns surrounding the banking crisis, and news of a short-term oil-supply disruption.
Natural-gas prices, meanwhile, marked their lowest settlement since September 2020, with prices pressured as forecasts for more moderate temperatures in parts of the U.S. dulled demand expectations.
Price action
- West Texas Intermediate crude for May delivery CL00, +0.80% CL.1, +0.80% CLK23, +0.80% rose 39 cents, or 0.5%, to settle at $ 73.20 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since March 13, according to Dow Jones Market Data.
- May Brent crude BRN00, +0.20% BRNK23, +0.19%, the global benchmark, settled at at $ 78.65 a barrel on ICE Futures Europe, up 53 cents, or 0.7%.
- Back on Nymex, April gasoline RBJ23, +1.13% climbed by 1% to $ 2.7121 per gallon, while April heating oil HOJ23, -0.05% lost less than 0.1% to $ 2.7696 a gallon.
- April natural gas NGJ23, -3.54% fell by 2.8% to settle at $ 2.03 per million British thermal units ahead of the contract’s expiration at the end of Wednesday’s trading session. The settlement was the lowest since Sept. 22, 2020.
Market drivers
Crude oil prices have climbed as banking-sector fears have eased, helping to improve the outlook for economic growth and, by extension, oil demand, analysts said.
Supply concerns were also in focus. A recent international ruling has resulted in at least a temporary halt of Kurdish oil exports through Turkey and the Ceyhan pipeline network, said Robbie Fraser, manager, global research & analytics at Schneider Electric, in a daily note. That’s impacting around 400,000 barrels per day or around 0.4% to 0.5% of global supply, he said.
“The ruling determined Iraq’s semi-autonomous Kurdish region could not export crude directly, but most do so with Baghdad’s approval and under the authority of the Iraqi central government,” said Fraser.
Prices for oil notched a second straight session gain Tuesday, but still trade sharply lower month to date.
The sell-off in oil was “based upon more fear of contagion in the banking sector than any real supply or demand fundamentals with oil,” said Phil Flynn, senior market analyst at The Price Futures Group.
“The market was trying to grasp just how bad the failure of Silicon Valley bank and the sale of Credit Suisse UBS would have on the overall market,” but that “could turn out to be more bullish for the market,” said Flynn. “The reason is that the banking cracks that have been seen will force global central banks to slow their rate of interest rate increases — and that should allow oil demand to continued unfettered.”
Meanwhile, signs of what Stephen Innes, managing partner at SPI Asset Management, described as a “China demand boom” have also helped to bolster oil prices recently.
Also on Nymex, natural-gas futures ended at their lowest in about two-and-a-half years, following a nearly 6% loss Monday to its lowest settlement in a month. Analysts attributed losses for the fuel to lower demand expectations as forecasts call for more spring-like weather in parts of the U.S.
The May natural-gas contract NGK23, -2.89% settled Tuesday at $ 2.147 — trading higher than the April contract.
There is a chance the roll over to the new contract can “save natural gas from sliding over” the $ 2 “cliff” if natural gas can just hang in there until after Wednesday’s expiration, said Robert Yawger, director of energy futures at Mizuho Securities USA, in a daily note.