Oil prices end lower but score first monthly gain since September

Oil futures settled lower on Wednesday, pressured in part by official data showing weekly gains in U.S. crude and gasoline supplies.

Prices, however, marked a gain for the month of January following three consecutive months of losses, as traders weighed concerns over the global demand outlook against the threat of an escalation in Middle East tensions.

Price moves

  • West Texas Intermediate crude for March delivery
    CL00,
    +0.41%

    CL.1,
    +0.41%

    CLH24,
    +0.41%
    fell $1.97, or 2.5%, to settle at $75.85 a barrel on the New York Mercantile Exchange. Front-month prices were 5.9% higher for the month, marking the first monthly gain since September, according to Dow Jones Market Data.

  • On its expiration day, the March contract for Brent crude
    BRNH24,
    -1.40%,
    the global benchmark, lost $1.16, or 1.4%, at $81.71 a barrel on ICE Futures Europe. It posted a monthly rise of 6.1%. April Brent
    BRN00,
    +0.36%

    BRNJ24,
    +0.36%,
    which is now the front month, declined by $1.95, or 2.4%, at $80.55 a barrel.

  • February gasoline
    RBG24,
    -3.33%
    lost 3.4% to $2.18 a gallon, for a monthly rise of 3.8%, while February heating oil
    HOG24,
    -0.46%
    added nearly 0.1% to $2.81 a gallon, and rose 10% for the month. The contracts expired at the end of the trading session.

  • Natural gas for March delivery
    NGH24,
    +2.95%
    settled at $2.10 per million British thermal units, up 1.1% Wednesday. Prices based on the front-month contract ended 16.5% lower for the month.

Supply data

The Energy Information Administration on Wednesday reported a surprise weekly increase in U.S. commercial-crude inventories, which climbed by 1.2 million barrels for the week ended Jan. 26.

On average, analysts surveyed by S&P Global Commodity Insights forecast a weekly decline of 2.3 million barrels. Late Tuesday, the American Petroleum Institute reported an inventory fall of 2.5 million barrels, according to analysts.

The EIA report also revealed a weekly supply rise of 1.2 million barrels for gasoline, while distillate stockpiles fell by 2.5 million barrels. The S&P Global Commodity Insights analyst survey showed forecasts for inventory losses of 450,000 barrels for gasoline and 700,000 barrels for distillates.

Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 2 million barrels last week, the EIA said, while U.S. oil production rose by 700,000 barrels to 13 million barrels a day. Freezing U.S. weather the week before had disrupted production, leading to a drop of 1 million barrels.

Other market drivers

Overall, “the market is trading cautiously ahead of the potential U .S. response to the recent assault in Jordan and how Iran will react in turn,” said Ewa Manthey and Warren Peterson, strategists at ING, in a note.

Oil futures have seen choppy trading this week, dropping Monday on worries about the outlook for crude demand from China after the ordered liquidation of Evergrande stoked worries about the drag from the country’s troubled property sector on the world’s second-largest economy.

Those concerns appeared to outweigh worries over an escalation of tensions in the Middle East that could threaten crude supplies, after a weekend drone attack by Iran-backed militants killed three U.S. troops in Jordan.

Still, traders must “watch what the response from the U.S. will be” to the loss of American lives over the weekend, said Tariq Zahir, managing member at Tyche Capital Advisors. “If we see a response on Iranian territory, we could see energy markets really go higher,” he told MarketWatch. “For now, we are entrenched in a risk-off environment,”

The OPEC+ Joint Ministerial Monitoring Committee is expected hold a meeting via videoconference Thursday to review the oil markets, according to news reports. The committee is not expected to make changes to existing policy during its meeting, according to Reuters, which cited five OPEC+ sources.

The committee last met on Nov. 30, the day OPEC+ ministers announced voluntary output cuts totaling more than 2 million barrels a day for the first three months of 2024, including the extension of a cut of 1 million barrels per day by Saudi Arabia.

CME Group’s OPEC+ Watch Tool on Wednesday estimated a 79.8% probability that the meeting results in no recommendation on output, a 17.6% chance of a recommendation to ease production cuts, and a 2.6% chance of a recommendation for further output reductions.

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