Thursday, February 2, 2023
HomeMarketU.S. oil benchmark slides toward $70 a barrel

U.S. oil benchmark slides toward $70 a barrel

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Oil futures ticked lower Monday, despite the continued shutdown of a major North American pipeline and China’s loosening of COVID-19 curbs, as worries remained over the demand outlook for crude.

Price action
  • West Texas Intermediate crude for January delivery
    fell 55 cents, or 0.8%, to $70.47 a barrel on the New York Mercantile Exchange. 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
    the global benchmark, fell 58 cents, or 0.8%, to $75.52 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
    fell 1.2% to $2.302 a gallon, while January heating oil
    rose 1.3% to $2.829 a gallon.

  • January natural gas
    jumped 12.1% to $7.001 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.

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.
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.


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