Oil prices up on prospects for Chinese demand, as global supplies look to tighten


Share post:

Oil futures headed higher on Tuesday, buoyed by expectations for stronger energy demand from China and signs of tighter global supplies, as traders assessed prospects for a cease-fire between Israel and Hamas.

Price moves

  • West Texas Intermediate crude
    for April delivery

    rose 67 cents, or 0.9%, to $78.25 a barrel on the New York Mercantile Exchange.

  • May Brent crude

    the global benchmark, was up 51 cents, or 0.6%, at $83.04 a barrel on ICE Futures Europe. Front-month April Brent
    added 51 cents, or 0.6%, at $82.18 a barrel.

  • March gasoline
    tacked on 1.7% to $2.3458 a gallon, while March heating oil
    edged up by 0.3% to $2.7702 a gallon.

  • Natural gas for March delivery
    traded at $1.675 per million British thermal units, up 1%, ahead of the contract’s expiration at the end of the session.

Market drivers

President Joe Biden said Monday that he hopes a cease-fire between Israel and Hamas could take effect by early next week, pausing hostilities and allowing for the release of remaining hostages.

“The reality is that Hamas is not saying that they’ve agreed to anything yet,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily note. 

Hostilities have so far not crimped the flow of crude from the Middle East, though concerns over a wider conflict have provided some underlying support to prices and have triggered occasional bouts of volatility.

Meanwhile, backwardation in both Brent and WTI oil futures suggest there is a tightness of supply for oil around the globe, said Flynn. Backwardation refers to a situation in crude contract values where prices for oil for delivery in the near future are higher than those for later deliveries.

The squeeze in supply seems to be due to a “combination of the fact that we’re seeing better than expected demand out of China and India, as well as delays in Red Sea cargoes due to the attacks by the Houthi rebels,” Flynn said.

On top of that, the reports that the G20 is saying that the chances of a soft landing in the global economy are looking more likely is raising demand prospects for oil and gas, he said.

“One of the reasons why oil prices were subdued was the market was betting that we were headed towards a global recession,” Flynn said. “If that does not happen…we see a situation where the supplies will tighten significantly in the next quarter.”

Colin Cieszynski, portfolio manager and chief market strategist at SIA Wealth Management, told MarketWatch that the recent support for oil prices has been coming from improving Chinese demand expectations.

Since the government undertook stimulus measures and interest rate cuts, China-sensitive markets including equities and crude oil have been improving, he said.

There “are suggestions that China has been buying crude cargoes at an accelerated pace since the mid-February holiday, while also increasing its term supplies from Saudi Arabia in March,” said Ewa Manthey and Warren Patterson, commodity strategists at ING, in a note.

“The increased purchase from the country could also be attributed to the advance buying made ahead of the maintenance work when refiners typically reduce imports,” they wrote.

Elsewhere, news reports said Russian Prime Minister Mikhail Mishustin approved a six-month ban on gasoline exports beginning March 1.

A ban is probably due to the refinery outages in Russia, said Barbara Lambrecht, commodity strategist at Commerzbank, in a note.

Russian gasoline exports, however, are low, she said, which means the ban is unlikely to significantly affect supply on the global market. As for the European market, imports of Russian petroleum products have already been sanctioned for around a year, with a few exceptions, she noted.

Source link

Alexandra Williams
Alexandra Williams
Alexandra Williams is a writer and editor. Angeles. She writes about politics, art, and culture for LinkDaddy News.

Recent posts

Related articles

Novavax failed to capitalize on fears surrounding mRNA vaccines, activist investor says

In a letter seen by MarketWatch, the activist fund blamed the sharp drop in Novavax’s sales on...

Fresh uncertainty around Fed rate cuts exposes the stock market’s winners and losers

Higher U.S. inflation is dashing investors’ hopes for multiple Federal Reserve rate cuts this year, while opening...

Shohei Ohtani not involved in gambling, prosecutors say, as they charge translator with stealing $16 million

Baseball star Shohei Ohtani was not involved in gambling and had no knowledge of payments being made...

Stocks, bonds slump as traders shift Fed rate-cut expectations to September

Markets were rattled Wednesday by a stronger-than-expected inflation report, with stocks and bonds selling off as investors...

Philips shares climb after finalizing pact with U.S. over device sales

Philips reiterated its financial outlook on Wednesday after finalizing a consent degree with the U.S. Department of...

GOP says Biden administration is using crypto as a ‘scapegoat’ for foreign-policy failures

The digital-asset industry and its allies in Congress on Tuesday criticized the Biden administration for blaming cryptocurrency...

States sue over Biden’s student-loan repayment program using arguments that succeeded before

Missouri and six other states are asking a court to block the Biden administration’s revamped student-loan repayment...

Congressional push to take TikTok off your phone may ‘be lost in the fog of presidential politics,’ Pence says

Senate Minority Leader Mitch McConnell and former Vice President Mike Pence are throwing their support behind a...