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Crude oil wasn’t content to rest on its laurels, adding to recent gains on Friday and securing a fourth winning week out of the last five. This ascent was achieved amidst a storm of conflicting reports and geopolitical tension in the Middle East.
Despite U.S. stockpiles posting a significant 12M-barrel build, the largest since November, the week was filled with turbulence. The International Energy Agency’s warning about global oil demand losing momentum and supplies outside OPEC+ continuing to rise combined with two unexpectedly hot U.S. inflation reports, complicating matters further. Nevertheless, the commodity managed to defy the odds and forge ahead.
The news was not all rosy, as demonstrated by a larger than expected drop in U.S. retail sales. However, economists quickly pointed out that these results may have been marred by a mid-January cold snap, keeping hopes for a rate cut alive.
Bloomberg’s Grant Smith remarked on time spreads for both the WTI and Brent benchmarks, signaling tight conditions and suggesting that the market is strong enough to buoy prices at their current levels, assuming no major supply shocks are forthcoming.
According to a Bloomberg seasonal analysis of Brent crude’s 10-year average, oil prices typically see a modest rise of 1.4% in Q1, yet the gains sit at around 5.5% so far this quarter, indicating a notable departure from historical trends.
The overall bullish sentiment is becoming increasingly apparent among prominent oil market observers. Standard Chartered is resolute in its belief that Brent prices should be above $90/bbl since oil inventories grew insignificantly last month. J.P. Morgan foresees a $10 hike in oil prices by May, and Morgan Stanley, having noted surprisingly tight conditions, has revised its price forecast upwards.
Seeing the fruits of its labor, front-month Nymex crude (CL1:COM) for March delivery notched a +1.5% increase on Friday, settling at $79.19/bbl – its loftiest value since November 6. Front-month April Brent crude (CO1:COM) also enjoyed a +0.7% uptick, reaching $83.47/bbl. Over the course of the week, WTI experienced a 3% surge while Brent saw a 1.5% climb.
Shifting gears, U.S. natural gas (NG1:COM) found itself on a downward trajectory for the fourth time in the past five weeks, mustering a +1.7% surge on the day. By the week’s end, it found itself down 12.9% at $1.609/MMBtu, marking its second lowest settlement this year.
It’s not just the commodities market that’s abuzz; exchange-traded funds like (NYSEARCA:USO), (BNO), (UCO), and more are experiencing heightened activity. Meanwhile, oil and gas equities represented by the Energy Select Sector SPDR (NYSEARCA:XLE) wrapped up the week with a +1.5% gain.
For those keeping a close eye on the energy and natural resources sector, it’s worth noting the top 5 gainers of the past 5 days: Fusion Fuel Green (HTOO) +105.4%, Verde Clean Fuels (VGAS) +95.4%, Nouveau Monde Graphite (NMG) +43.3%, Meta Materials (MMAT) +38.1%, and DNOW (DNOW) +25.1%. Conversely, the top 5 decliners during the same period were: SSR Mining (SSRM) -48.6%, Fluence Energy (FLNC) -14.6%, Bloom Energy (BE) -14.3%, Global Gas (HGAS) -13.2%, and Encore Energy (EU) -11.3%. These figures serve as a testament to both the volatility and potential gains or losses within this dynamic market.
Sources: Barchart.com
