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Oil futures stabilized early Monday following the longest losing stretch since 2018 as concerns about a slowing global economy, coupled with booming U.S. supply, helped keep prices anchored around $70 a barrel.
Price action
-
West Texas Intermediate crude for January
CL00,
-0.53% CLF24,
-0.53%
delivery was down 19 cents, or 0.3%, at $71.05 a barrel on the New York Mercantile Exchange. Based on the front-month contract, prices ended 3.8% lower for the week on Friday, according to Dow Jones Market Data. That marked the seventh consecutive week of losses, the longest streak since 2018. -
February Brent crude
BRN00,
-0.44% BRNG24,
-0.44% ,
the global benchmark, fell 13 cents, or 0.2%, to $71.10 a barrel on ICE Futures Europe, losing nearly 3.9% for the week. -
January gasoline
RBF24,
-0.73%
shed 0.1% to $2.048 a gallon. Prices fell 3.4% last week. January heating oil
HOF24,
+0.55%
gained 0.4% to $2.5908 a gallon, after falling 3% last week. -
Natural gas for January delivery
NGF24,
-10.11%
was down 7.9% early Monday at $2.38 per million British thermal units, after falling 8.3% last week.
Market drivers
Oil traders couldn’t help but take notice over the weekend when China’s official consumer-price index showed prices fell in November at the fastest clip in three years, declining 0.5% on a year-over-year and month-over-month basis, according to data from the National Bureau of Statistics.
Declining prices last month were the latest sign of weakening demand for industrial commodities like oil in the world’s second-largest economy. And with much of Europe either in, or near, recessionary territory, the outlook for global demand remained grim, Mike O’Rourke, chief market strategist at JonesTrading, told MarketWatch.
“You have China slowing down, you have Europe either in recession or on the cusp of recession, and our economy [the U.S.] has slowed down here, but not as much as other places,” O’Rourke said. “That is why we’re stuck around $70 [a barrel].”
On the supply side, traders harbor doubts about whether members of OPEC+ will follow through with voluntary production cuts for the first quarter of 2024 announced late last month.
A team of analysts at RBC Capital Markets touched on this in their 2024 commodity-market outlook, saying that oil has become a “show me” market where traders wait for cuts to materialize before moving to price them in.
“Oil has become a ‘show me’ type market. Prices will remain volatile and directionless until the market sees clear data points pertaining to the voluntary output cuts. With cuts not implemented until next month, and country level production data to follow subsequent to January, it will be a volatile two months before there is preliminary clarity,” the team said.
Meanwhile, production in the U.S. continued to boom last week, with official Energy Department data showing U.S. producers pumping out more than 13 million barrels a day.
Even an announcement by the U.S. government of plans to buy oil to refill the Strategic Petroleum Reserve wasn’t enough to provoke a sustainable bounce in prices, said Saxo Bank’s Ole Hansen, the bank’s head of commodity strategy.
See: U.S. Energy Department looks to buy more crude oil for the SPR
“Supporting the Monday morning pop was the news the U.S. government plans to buy crude oil for its SPR, but the quantity being mentioned is unlikely to move the focus away from a softening market which will continue to need OPEC+ production cut unity to avoid a deeper selloff,” he said.
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