Oil futures finished lower on Friday, paring their gain for the week as traders assessed growing supplies, the demand outlook, weather-related U.S. production challenges, and continued tensions in the Middle East.
Price moves
- West Texas Intermediate crude for February delivery CL.1,
-0.39% CLG24,-0.39% fell 67 cents, or 0.9%, to settle at $73.41 a barrel on the New York Mercantile Exchange, ending 1% higher for the week. March WTI CL00,-0.51% CLH24,-0.51% , the most actively traded contract, lost 70 cents, or nearly 1%, at $73.25 a barrel. - March Brent crude BRN00,
+0.32% BRNH24,+0.32% , the global benchmark, declined by 54 cents, or 0.7%, at $78.56 a barrel on ICE Futures Europe, edging up 0.3% for the week. - February gasoline RBG24,
-0.50% shed nearly 1% to $2.16 a gallon, settling 2% higher for the week, while February heating oil HOG24,-0.97% lost 1.2% to $2.66 a gallon, for a weekly fall of 0.3%. - Natural gas for February delivery NGG24,
-6.12% settled at $2.52 per million British thermal units, down 6.6% for the session to post a weekly loss of 24%.
Market drivers
Oil has been weak because “various geopolitical events have had no impact on actual supply and the economic situation is looking weaker, including the latest housing sales report,” said Michael Lynch, president of Strategic Energy & Economic Research.
Oil ended with a loss on Friday, shaking off early gains to pare its overall climb for the week.
“Oil prices remain violently rangebound to start the year,” said Michael Tran, commodity analyst at RBC Capital Markets, in a note. “While 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.”
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.
Read: Oil traders aren’t panicking over Middle East shipping attacks. Here’s why.
“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.
In the U.S., oil production outages in North Dakota and other northern parts of the nation due to “adverse weather and extremely cold temperatures,” contributed to the gains in prices for the commodity this week, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.
“Idling oil rigs and then restarting them isn’t always as easy as flipping a switch” and if some wells remain offline for more than just a few days, that would tighten supplies, he said.
““Idling oil rigs and then restarting them isn’t always as easy as flipping a switch.””
— Tyler Richey, Sevens Report Research
However, oil market fundamentals are “tilted slightly in favor of the bears right now,” said Richey. OPEC+ isn’t widely expected to cut production much further than it already has, while the latest economic data has pointed to a “measurable slowdown in growth overseas with little discussion of imminent support coming from global central banks” in the form of rate cuts.”
Natural-gas futures, meanwhile, lost more than 20% for the week, after posting two consecutive weekly gains.
U.S. natural-gas demand was up 30% year over 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.
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