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Oil futures held ground at their highest levels in two weeks on Tuesday, 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.
Price action
-
West Texas Intermediate crude for May delivery
CL00,
+0.59% CLK23,
+0.59%
rose 25 cents, or 0.3%, to $73.06 a barrel on the New York Mercantile Exchange. Prices traded as high as $73.52, the highest intraday level since March 14, FactSet data show. -
May Brent crude
BRN00,
+0.48% BRNK23,
+0.65% ,
the global benchmark, traded at $78.29 a barrel on ICE Futures Europe, up 17 cents, or 0.2%. -
Back on Nymex, April gasoline
RBJ23,
+0.77%
climbed by 0.4% to $2.6951 per gallon, while April heating oil
HOJ23,
+0.65%
added 0.5% to $2.7849 a gallon. -
April natural gas
NGJ23,
+0.67%
fell by 0.4% to $2.08 per million British thermal units ahead of the contract’s expiration at the end of Wednesday’s trading session.
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.
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 were on track to notch 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 traded mostly lower in the wake of a nearly 6% loss Monday, which analysts attributed to demand expectations as forecasts call for more spring-like weather in parts of the U.S.
The front-month April contract, which settled Monday at its lowest in more than a month, is set to expire Wednesday. The May contract
NGK23,
currently trades higher than the April contract.
There is a chance the roll over to the new contract can “save natural gas from sliding over” the $2.00 “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.
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