Oil futures saw mixed trading Monday, with U.S. prices modestly extending a loss from last week but global benchmark prices ending with a slight gain, as traders weighed demand and the willingness of OPEC+ members to stick to production cuts.
Price moves
- West Texas Intermediate crude CL00, +0.15% for April delivery CL.1, +0.15% CLJ24, +0.15% fell 8 cents, or 0.1%, to settle at $ 77.93 a barrel on the New York Mercantile Exchange after losing 2.5% last week.
- May Brent crude BRN00, +0.26% BRNK24, +0.26%, the global benchmark, edged up by 13 cents, or 0.2%, to settle at $ 81.21 a barrel on ICE Futures Europe, following last week’s decline of 1.8%.
- April gasoline RBJ24, +2.44% tacked on 2.1% to $ 2.58 a gallon, while April heating oil HOJ24, +0.77% added 0.4% to $ 2.65 a gallon.
- Natural gas for April delivery NGJ24, -2.38% settled at $ 1.76 per million British thermal units, down nearly 2.6%.
Market drivers
For oil, geopolitics were relatively quiet on Monday, Michael Lynch, president at Strategic Energy & Economic Research, told MarketWatch, with the market potentially experiencing “crisis fatigue.”
“The market is overdue for a correction, so a little profit-taking might be in order,” he said.
In Monday commentary, analysts at Zaner warned that the bull camp in oil “should worry about demand again as a lengthening string of soft U.S. data has become a trend and economic news from China is not definitively upbeat yet.”
“Bull camp in oil ‘should worry about demand again as a lengthening string of soft U.S. data has become a trend and economic news from China is not definitively upbeat yet.’”
However, crude prices could find some support from a tightening of U.S. oil supplies because of weakness in the dollar and from the “spooling up” of U.S. refinery activity after extended maintenance left nearly 20% of U.S. refinery capacity offline for the last five weeks, the Zaner analysts said. Fortunately for the bull camp, the recent jump in the refinery operating rate from 80.6% on Feb. 9 to last week’s 84.9% should improve crude demand.
WTI and Brent crude both posted losses last week, with some analysts attributing the weakness to soft Chinese economic data, which signaled weaker demand for oil.
Overall, crude has remained stuck in a narrow trading range, with analysts tying support in part to production cuts by OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies. OPEC+ earlier this month agreed to extend voluntary production cuts into the second quarter.
Skepticism around the ability of OPEC and its allies to stick to output cuts, however, has served to limit upside for crude, analysts said.
“Price discovery is akin to slogging through a quagmire. Still, we remain skeptical of OPEC members complying with voluntary cuts as U.S. production soars, albeit it shows signs of peaking,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
”Compliance could be the issue even if they eventually follow through with a year-long extension,” he said.
Looking ahead, analysts at Sevens Report Research wrote in Monday’s newsletter that the main factors in focus for oil this week will be Chinese growth expectations, U.S. consumer demand in the weekly Energy Information Administration data and Federal Reserve policy expectations.