Oil futures moves higher in ‘violently rangebound’ market
Oil futures were flat to slightly lower Friday, on track for weekly gains as traders weighed growing supplies, the demand outlook and continued tensions in the Middle East.
Price moves
-
West Texas Intermediate crude for February delivery
CL.1,
+0.53% CLG24,
+0.53%
rose 75 cents, or 1%, to $74.83 a barrel on the New York Mercantile Exchange, trading 3% higher for the week. March WTI
CL00,
+0.37% CLH24,
+0.37% ,
the most actively traded contract, was up 66 cents, or 0.9%, at $74.61 a barrel. -
March Brent crude
BRN00,
+0.40% BRNH24,
+0.40% ,
the global benchmark, climbed 49 cents, or 0.6%, at $79.59 a barrel on ICE Futures Europe, up 1.7% for the week. -
February gasoline
RBG24,
-0.04%
added 0.2% to $2.1875 a gallon, trading more than 3% higher for the week, while February heating oil
HOG24,
+0.06%
added 0.6% to $2.7088 a gallon, eyeing a weekly rise of 1.5%. -
Natural gas for February delivery
NGG24,
-5.08%
traded at $2.597 per million British thermal units, down 3.7% for the session and poised for a weekly loss of over 20%.
Market drivers
“Oil prices remain violently rangebound to start the year,” said Michael Tran, commodity analyst at RBC Capital Markets, in a note. “While the this sentence sounds like an oxymoron, keen observers of the market have become numb or achieved a degree of analysis paralysis to start the year given the confluence of escalating geopolitical risk enveloped in a market that remains reasonably well supplied.”
Oil futures traded higher for the week, poised to recoup their losses from last week.
“While the price of crude remains sensitive to events in the Middle East…the oil market remains well-balanced which is why we’re not seeing prices higher,” said Craig Erlam, senior market analyst at OANDA. “Supply disruptions remain an upside risk but there are downside risks too, including the global economy and OPEC+ unity.”
This week, Pakistan and Iran traded military strikes and U.S. forces launched new strikes against Iran-backed Houthi militants who have continued to target Red Sea shipping with missile and drone attacks. That’s caused disruption to shipping, including the rerouting of oil tankers, but has yet to diminish the flow of crude out of the Middle East.
“Historical rules of thumb regarding traditional shipping lanes continue to be rewritten, though some may argue that rewriting the rules of transport is simply yet another chapter in an escalating list of trade flow disruptions dating back to Russia’s invasion of Ukraine,” Tran said.
Liquidity, meanwhile, remains soft and positioning remains uninspiring as investors grapple with the push and pull between geopolitical reality squared off against a significant amount of available spare capacity, Tran said.
Natural-gas futures, meanwhile, were on track to lose more than 20% for the week, after posting two consecutive weekly gains.
U.S. natural-gas demand was up 30% year on year this past week, largely on the back of residential and commercial demand, power burn, and industrial demand, strategists at J.P. Morgan wrote in a note Friday. Domestic supplies of the commodity in storage, however, stand 11% above the five-year average, they said.
