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Futures Movers: Oil futures settle higher, but U.S. prices register a 5th straight monthly decline

Oil futures settled at their highest in about three weeks on Friday, but U.S. prices posted a fifth consecutive monthly decline, pressured by concerns over a potential recession and decline in energy demand.

Price action

West Texas Intermediate crude for May delivery 
CL00,
+1.61%

CLK23,
+1.61%

CL.1,
+1.61%

rose $1.30, or nearly 1.8%, to settle at $75.67 a barrel on the New York Mercantile Exchange. Front-month prices, which ended at their highest since March 10, marked a monthly loss of 1.8% and a quarterly decline of 5.7%, according to Dow Jones Market Data.

May Brent crude 
BRN00,
-0.13%

 
BRNK23,
+0.59%

 , the global benchmark, rose 50 cents, or 0.6%, to end at $79.77 a barrel on ICE Futures Europe on the contract’s expiration day. Front-month prices marked a finish at their highest since March 13, ending 4.9% lower for the month and over 7% lower for the quarter.

April gasoline 
RBJ23,
+2.09%

added 1.5% to $2.7005 per gallon, climbing 9.8% for the quarter, while April heating oil
HOJ23,
+2.13%

rose 2% to $2.6763 a gallon, with prices posting a more than 20% quarterly loss. The April contracts expired at the end of Friday’s session.

May natural gas 
NGK23,
+4.33%

rose 5.3% to settle at $2.216 per million British thermal units, but logging a loss of over 19% for March and a first-quarter drop of more than 50%.

Market drivers

U.S. crude prices rallied by more than 9% this week, helped by such factors as supply problems out of Northern Iraq, U.S. dollar weakness, a hefty weekly drop in U.S. crude inventories and improved risk sentiment, along with signs of China’s economic recovery, Ole Hansen, head of commodity strategy at Saxo Bank, said in a note to clients.

Concerns about the banking crisis in the U.S. and Europe have also eased, allowing oil prices to recover somewhat, as fears of a financial crisis that could have a major impact on the economy and oil demand subsided, said Matthew Sherwood, senior Europe and lead commodities analyst at The Economist Intelligence Unit (EIU). That prompted prices for WTI to trade more than 8% higher for the week, and Brent to move up 6% from the week-ago settlement.

Still, U.S. crude benchmark prices saw a fifth monthly loss in a row.

“Investors continue to assess the long-term implications of turmoil in Western banking systems,” said Sherwood, adding that EIU believes that “recession risks have increased, as banking lending standards will tighten further in the wake of SVB and Credit Suisse.”

Even so, the oil market still remains tight and we expect Brent to head above $80 a barrel and even approach $90 by the middle of the year as “demand continues to recover in China and the supply response remains muted,” especially in the Organization of the Petroleum Exporting Countries, he said.

OPEC and its allies, a group known as OPEC+, will hold a committee meeting Monday, as it does every two months, to review the oil market.

Read: OPEC+ committee is set to review an oil market plagued by concerns over the banking crisis and a recession

Meanwhile, natural-gas futures ended higher Friday, but the rise did little to offset the significant price losses for the month and quarter, after recently dropping to their lowest in two-and-a-half years.

Read: Natural gas is among the worst-performing commodities in the first quarter, while steel, iron ore strengthen

“Europe is the big story here. European natural gas storage is currently at about 56% of capacity, a historically high level for this time of year,” said EIU’s Sherwood. “An unseasonably warm 2022/23 winter means that European stocks remained much higher than expected through the winter and reduced the amount that needs to be topped up over the summer as Europe prepares for the 2023/24 winter.”

The developments in Europe have had a knock-on impact on U.S. Henry Hub natural-gas prices, and a  “weather-related slump in U.S. natural-gas demand also played a major role in the sharp fall for U.S. prices in the first quarter, he said.

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