By Myra P. Saefong and William Watts
Oil futures rose on Wednesday, with investors and analysts fixated on prospects for a recovery in demand for crude oil from China after the country lifted the COVID curbs that were seen reducing consumption from one of the world’s largest energy importers.
Natural gas futures, meanwhile, extended January’s slump to mark their lowest milestone in about 20 months.
Price action
Market drivers
Oil prices stumbled at the start of the year but recovered, with WTI back in positive territory for the month, on optimism over the outlook for crude demand from China.
The rebound “coincided with a significant fundamental shift in the global macroeconomic landscape that should sow the seeds for further oil price appreciation from here, as bullish reopening expectations continue to rest on the premise that full Chinese demand isn’t reflected either.” remotely in the current pricing market, especially as international travel continues to open up,” Stephen Innes, managing partner at SPI Asset Management, said in a statement.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC), which monitors the oil market, is scheduled to meet on February 1 and is not expected to change the group’s production quota, StoneX’s Kansas City energy team wrote in the Thursday newsletter.
“This is widely considered a bullish expectation considering China’s reopening adds more demand for crude oil,” they said.
The next full meeting of members of the Organization of the Petroleum Exporting Countries and their allies is scheduled for June.
Oil traders are also looking ahead to the European Union’s Feb. 5 ban on imports of Russian petroleum products, which is expected to lead to tighter global supplies and higher diesel prices.
Natural gas, meanwhile, plunged to its lowest since May 2021 amid unusually warm weather in the United States and much of the Northern Hemisphere. This helped Europe replenish natural gas supplies, averting a winter heating crisis that had been widely feared due to the Russian invasion of Ukraine.
Based on the more actively traded contract, natural gas was on track for a nearly 8% weekly decline and is down nearly 32% so far in January.
The US Energy Information Administration reported Thursday that domestic natural gas supplies fell by 91 billion cubic feet for the week ending Jan. 20. That compares with an average analyst forecast for a decline of 84 billion cubic feet, according to a survey conducted by S&P Global Commodity Insights.
However, total inventories of working gas in storage stand at 2.729 trillion cubic feet, up 107 billion cubic feet from a year ago and 128 billion cubic feet above the five-year average, the government said. The five-year average drawdown is 185 bcf, according to S&P Global Commodity Insights.
See Also: Gasoline Prices Climb to $3.50 a Gallon in January, Threatening Fed’s Inflation Fight
-Myra P.Saefong
(END) Dow Jones Newswires
01-26-23 1526ET
Copyright (c) 2023 Dow Jones & Company, Inc.
