Tag: HOF24

Oil prices end lower as crude suffers first losing year since 2020
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Oil futures ended slightly lower Friday on the final trading day of 2023, capping crude’s first losing year since 2020 as concerns about the demand outlook outweighed potential supply disruptions and efforts by OPEC and its allies to limit production.

Price action
- West Texas Intermediate crude for February delivery
  CL00,
  -0.45%
  
  CL.1,
  -0.45%
  
  CLG24,
  -0.45%
  fell 12 cents, or 0.1%, to close at $71.65 a barrel on the New York Mercantile Exchange.
- March Brent crude
  BRN00,
  +0.05%
  
  BRNH24,
  +0.05%,
  the global benchmark, fell 11 cents, or 0.1%, to settle at $77.04 a barrel on ICE Futures Europe.
- Back on Nymex, January gasoline
  RBF24
  rose 0.8% to $2.103 a gallon, while January heating oil
  HOF24
  fell 0.1% to $2.553 a gallon.
- February natural gas
  NGG24,
  -0.64%
  declined 1.7% to finish at $2.514 per million British thermal units.
Market drivers

WTI, the U.S. benchmark, slumped 21.1% in the fourth quarter and suffered a yearly fall of 10.7%. Brent tumbled over 19% in the final three months of the year, posting an annual loss of 10.3%.

Gasoline futures dropped 14.5% in 2023, while heating oil declined 24.1%. Natural gas plunged nearly 44%.

Crude had rallied over the summer as the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, maintained production cuts, with Saudi Arabia throwing in a voluntary reduction of 1 million barrels a day beginning in July and Russia moving to curb exports. While production cuts have been rolled over into early 2024, oil peaked in late September as expectations for a significant supply deficit failed to materialize.

Increased production by the U.S., which saw its output hit record levels in 2023, and other non-OPEC producers have also capped the upside for crude, analysts said.

Read: Why oil may not see a return to $100 a barrel in 2024

Oil futures jumped in the wake of the outbreak of the Israel-Hamas war in October on fears that a broader conflict could cramp supplies from the Middle East, but crude failed to challenge its September highs and soon eroded its geopolitical-risk premium. Prices bounced somewhat in December as attacks by Yemen’s Iran-backed Houthi rebels on shipping vessels in the Red Sea sparked a round of rerouting, but gains have proven difficult to sustain.

Instead, investors “have started to focus on the risk that there may be excessive supply in oil markets next year, and insufficient demand,” said Marios Hadjikyriacos, senior investment analyst at XM, in a note.

“Even though OPEC+ has taken repeated steps to rein in production and support prices, it is unlikely to pursue the same strategy for much longer, as it would forfeit more market share to U.S. producers who have dialed up their own production to record levels,” he wrote.

Natural-gas prices, meanwhile, have slumped recently on a warmer-than-normal winter, said Lu Ming Pang, senior analyst at Rystad Energy, in a Friday note.

The number of heating-degree days (HDDs), which reflect the extent of heating required, has been below normal so far, with a deviation of 28 fewer HDDs from the normal reported on Dec. 15, the analyst noted. HDDs are forecast to rise through Jan. 5 but remain slightly below normal.

“Gas demand for heating is likely to rise as a result but will still remain below seasonal norms,” Pang said. “A combination of warmer weather, high underground-storage levels, and high domestic gas production is expected to keep U.S. prices suppressed.”
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December 29, 2023
Oil prices post first weekly gain in 8 weeks amid ship attacks in Red Sea
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Oil futures fell on Friday, but finished off the session’s lows to eke out a gain for the week — the first for U.S. and global benchmark crude prices in eight weeks.

Attacks on ships traveling through the Red Sea, blamed on Yemen’s Houthi rebels, raised the potential for disruptions to the transport of oil and other goods, providing some support for prices.
Oil saw larger declines early Friday after a Federal Reserve official walked back dovish comments made earlier this week by the Fed Chair Jerome Powell, helping to strengthen the U.S. dollar.

Price action

West Texas Intermediate crude for January
CL00,
+0.49%

CL.1,
+0.49%

CLF24,
+0.49%
declined by 15 cents, or 0.2%, to settle at $71.43 a barrel on the New York Mercantile Exchange, with prices ending 0.3% higher for the week, according to Dow Jones Market Data.

February Brent crude
BRN00,
+0.52%

BRNG24,
+0.52%,
the global benchmark, fell 6 cents, or nearly 0.1%, to $76.55 a barrel on ICE Futures Europe, settling 0.9% higher for the week.

January gasoline
RBF24,
-0.16%
added 0.9% to $2.14 a gallon, up almost 4.3% for the week, while January heating oil
HOF24,
+0.20%
climbed 1.1% to $2.62 a gallon on Nymex, marking a weekly rise of 1.5%.

Natural gas for January delivery
NGF24,
-0.88%
gained 4.1% to $2.49 per million British thermal units, but still logged a weekly loss of 3.5%.

Price support

Danish shipping company A.P. Moeller-Maersk
MAERSK.A,
+7.52%
said it will pause all of its container shipments through the Red Sea until further notice and detour them around Africa, Reuters and Bloomberg reported Friday, amid rising risks to its fleet posed by Houthi militants.

The Red Sea is “one of the hot pockets of seaborne crude flows,” accounting for approximately 10% of global volume, said Manish Raj, managing director at Velandera Energy Partners. “Although the attackers lack sophistication … shipping crews are even less sophisticated, making them easy targets.”

A potential blockage of the Red Sea route would be “chaotic indeed, but not nearly as detrimental as blockage of [the] Strait of Hormuz near Iran, for which there is no viable alternative,” Raj said.

Read from the AP: How are Houthi attacks on ships in the Red Sea affecting global trade?

For now, there is concern over higher insurance costs for these ships, said Phil Flynn, senior market analyst at the Price Futures Group.

“With ships in the Red Sea continuing to be at high risk, ‘it won’t take that much for the market’ to see oil prices spike if an oil tanker should be hit.”

— Phil Flynn, Price Futures Group

Obviously, the risk to oil supply is large, although “so far, most of the attacks have been on cargo ships and not oil-related ships,” Flynn told MarketWatch.

However, as ships in the Red Sea continue to be at high risk, “it won’t take that much for the market” to see oil prices spike if an oil tanker is hit, Flynn said.

For the week, both U.S. and global benchmark crude prices posted gains.

“The combination of lower U.S. inventories, stronger economic data, and improved OPEC compliance [with production cuts] for the month of November were the highlights of the week,” said Peter McNally, global head of sector analysts at Third Bridge.

“However, there are ongoing seasonal challenges that forced OPEC to sustain production cuts through the first quarter of 2024, so it remains to be seen if they have done enough to prevent inventories from continuing their upward trend,” he said.

Read The Year Ahead: Why oil may not see a return $100 a barrel in 2024

Price pressures

Oil had been trading lower early Friday after New York Federal Reserve President John Williams told CNBC that it is “premature” to discuss whether it is time to cut interest rates. “We aren’t really talking about cutting interest rates right now,” Williams said.

That ran contrary to Powell’s comments Wednesday that Fed officials were starting to discuss when to cut rates.

After the euphoria in the U.S. stock market over the Powell “pivot party” on Wednesday, we got a “wake-up call” from Williams when he pushed back on market expectations for a March rate cut, Michael Hewson, chief market analyst at CMC Markets UK, said in market commentary.
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December 15, 2023
Oil prices drop to 2-week lows as doubts linger over OPEC+ production cuts
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Oil futures fell Monday to their lowest levels in more than two weeks, building on recent declines that came after a round of voluntary production cuts announced by OPEC+ left traders skeptical about compliance.

Price action
- West Texas Intermediate crude for January delivery
  CL00,
  -0.63%
  
  CL.1,
  -0.63%
  
  CLF24,
  -0.63%
  fell 85 cents, or 1.2%, to $73.22 a barrel on the New York Mercantile Exchange,
- February Brent crude
  BRN00,
  -0.44%
  
  BRNG24,
  -0.44%
  dropped $1.29, or 1.6%, $77.59 a barrel on ICE Futures Europe.
- January gasoline was down 0.1% at $2.1198 a gallon, while January heating oil
  HOF24,
  +0.85%
  edge down 0.4% to $2.6501 a gallon.
- January natural gas
  NGF24,
  -4.48%
  declined 5.3% to $2.664 per million British thermal units.
Market drivers

The OPEC+ deal last week was “unconvincing, to say the least, and oil prices have been in decline ever since,” said Craig Erlam, senior market analyst at OANDA.

“With markets seemingly anticipating more of an economic slowdown next year, the announcement simply doesn’t go far enough,” he said in market commentary. “It’s another large cut but how much will actually be delivered on? And are we at the limits of what the alliance is willing to achieve to balance the markets?”

Crude prices ended last week with back-to-back losses after OPEC+ producers on Thursday agreed to voluntarily cut around 2.2 million barrels a day (mbd) of crude from the market in the first quarter of next year, a figure that included a widely expected extension of Saudi Arabia’s 1 mbd voluntary output cut and Russia’s 300,000 barrel a day cut to crude exports.

OPEC+ cuts “look like they have rebalanced the market” for the first quarter of next year, but without further OPEC+ cuts in supply from the second quarter, “oil looks to register a 1 mbd surplus in that quarter, analysts at Citi wrote in a note dated Monday.

The voluntary nature of the overall reductions sparked skepticism around enforcement and compliance, analysts said.

“Soft price action since the OPEC+ meeting is reflective of an investor cohort that remains perplexed on how to deploy risk. The near-term path of least resistance is lower, given the degree of ambiguity and lack of catalysts,” Michael Tran, commodity and digital intelligence strategist at RBC Capital Markets, said in a Sunday note.

“Oil has become a ‘show me’ type market. Now here comes the hard part: Prices will likely remain volatile and potentially directionless until the market sees clear data points pertaining to the voluntary output cuts,” he said.

Those cuts won’t be implemented until next month, with country-level production and export data to follow. That means it will be a “long and volatile” two months before there is even preliminary clarity on compliance — “a long stretch for a market that is seeing a high degree of uncertainty, lack of risk deployment and a liquidity vacuum,” Tran wrote.

Traders were also monitoring developments in the Middle East following an escalation of maritime attacks related to the Israel-Hamas war.

Ballistic missiles fired by Yemen’s Houthi rebels hit three commercial ships Sunday in the Red Sea, while a U.S. warship shot down three drones in self-defense during the hourslong assault, according to the U.S. military. The Iranian-backed Houthis claimed two of the attacks.

Oil futures spiked higher following the Hamas attack on southern Israel on Oct. 7 but failed to challenge their late September highs. Crude subsequently fell back as fears of a broader conflict that could threaten crude flows faded, trading well below levels seen just before the start of the conflict.

— Associated Press contributed.
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December 4, 2023