Futures Movers: Oil futures on track to book a second weekly decline

Futures Movers: Oil futures on track to book a second weekly decline

17 Jan    Finance News

Oil futures struggled for direction on Friday, seesawing between modest gains and losses, with prices on track to register a loss for a second week in a row.

Traders continued to weigh the prospects for energy demand in the wake of the China-U.S. trade deal on Wednesday and Senate approval of the U.S.-Mexico-Canada trade on Thursday.

Oil prices had spent the front half of the week moving lower “largely thanks to lingering oversupply concerns and a continued unwind of the geopolitical fear bid that was triggered by the U.S.-Iran tensions at the turn of the year,” said Tyler Richey, co-editor at Sevens Report Research.

“Trade deal optimism stemming from the phase-one deal signing ceremony between the U.S. and China on Wednesday, as well as the[Senate passage of the revised U.S.-Mexico-Canada trade agreement Thursday “are both bolstering demand expectations, which has helped oil stabilize into the weekend,” he told MarketWatch.

“While there are energy specific details within the respective trade deals, the more important and overarching theme is that the progress is positive for the broader global growth outlook, and ultimately, that is bullish from a demand standpoint,” Richey said.

West Texas Intermediate crude for February delivery CLG20, -0.10%  was little changed, trading at $58.50 a barrel on the New York Mercantile Exchange, down 2 cents, or 0.03%, in Friday dealings after rising 1.2% on Thursday.

March Brent BRNH20, +0.20%, the global benchmark, advanced 7 cents, or 0.1%, at $64.69 a barrel on ICE Futures Europe, following a 1% gain a day ago.

However, for the week both contracts were set for declines. Brent is on track for a weekly loss of about 0.5%. while WTI is looking at a 0.9% weekly skid.

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Among the petroleum products, February gasoline RBG20, -0.73%  fell 0.6% to $1.6457 a gallon, looking at a weekly loss of 0.8%, while February heating oil HOG20, +0.05%  added 0.1% to $1.862 a gallon, on track for a weekly loss of 3.5%.

Data from China showed slower economic growth last year, clouding the prospects for crude uptake. The “actual GDP print doesn’t paint a strong picture in terms of Chinese growth,” said Naeem Aslam, chief market analyst at AvaTrade. “This means we do not see any major upside move in the oil price in the coming week—it would be more of a consolidation move.”

Chinese officials said the country emerged from 2019 with an official economic growth of 6.1%, within the government’s target range of 6% to 6.5% but the lowest level in nearly three decades.

“Going forward, it is important that we continue to see progress on trade negotiations and, in time, firming economic data as a result because that expectation is priced into markets right now including the energy space,” said Richey. “Any disappointment will lead to a more pronounced pullback in oil futures.”

“Hopes for accelerating demand growth is the number one influence on oil,” he said. “That could change in a hurry however if there are any supply side surprises, such as another spike in geopolitical tensions threatening oil operations in the Middle East or if compliance rates to individual output quotas among OPEC+ producers miss expectations.”

Round out action on Nymex, prices for natural gas were poised to settle at their lowest front-month futures contract settlement since May 2016, according to Dow Jones Market Data.

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February natural gas NGG20, -3.27%  fell 6.8 cents, or 3.3%, to $2.009 per million British thermal units. Prices have fallen by about 8.8% this week.

“Short-term weather forecasts have turned mild once again, with warmer-than-normal temperatures predicted for the northern US during the period of January 22 to 26,” said Christin Redmond, commodity analyst at Schneider Electric.

The Energy Information Administration on Thursday reported a bigger-than-expected weekly decline in U.S. natural-gas supplies on Thursday, but they remain above the year-ago and five year average levels.

“As long as mild temperatures continue to weigh on demand and supply outlooks remain strong, momentum is likely to remain with the bears,” said Redmond in a daily note.

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