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Crude oil futures launched the week with consecutive gains after a recent plunge to three-week lows.
Initially surging by over $1 per barrel, prices retreated following Secretary of State Antony Blinken’s mention of efforts to negotiate a ceasefire in the Gaza War and a review of a Hamas reply to a proposal.
The U.S. has been maintaining its campaign against Iran-backed Houthis. The group’s attacks on shipping vessels in the Red Sea disrupted global oil trading routes.
“Geopolitical tensions are likely to keep crude bulls in the game above $70,” said FXTM’s Lukman Otunuga. However, gains may be moderated due to diminishing expectations around aggressive Fed rate cuts and mounting concerns over China’s economy, according to Otunuga’s comments to MarketWatch.
Front-month Nymex crude (CL1:COM) for March delivery finished +0.7% to $73.31 per barrel, and front-month April Brent crude (CO1:COM) closed +0.8% to $78.59 per barrel.
Several ETFs in the energy sector saw potential effects, including (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), and (USOI).
The U.S. Energy Information Administration, in its Short-Term Energy Outlook, revised down its forecast for domestic oil production growth. The EIA now anticipates U.S. output to grow by 170K barrels per day this year, down from its previous estimate for a rise of 290K barrels per day and well below last year’s increase of 1.02M barrels per day.
The EIA projects U.S. crude production will remain steady at 13.21M barrels per day for most of this year and will not achieve a new record until early 2025. This projection potentially alleviates concerns about a supply glut that has exerted downward pressure on prices.
Cold weather-induced shutdowns led to a drop in output to 12.6M barrels per day in January from a record 13.3M barrels per day in December, as per the EIA’s report.
