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Futures Movers: Oil prices look to extend last week’s slide

Oil futures moved lower Monday, extending their losses from last week, with U.S. prices on track for their lowest finish since December as uncertainty continues over the global demand outlook.

Price action

West Texas Intermediate crude for March delivery



fell 79 cents, or 1.1%, to $72.60 a barrel on the New York Mercantile Exchange after trading as low as $72.42. Front-month contract prices haven’t traded or settled at levels this low since December. The U.S. benchmark fell 7.9% last week to end Friday at its lowest since Jan. 4.

April Brent crude

the global benchmark, declined 54 cents, or 0.7%, to trade at $79.40 a barrel on ICE Futures Europe. It fell 7.5% last week to end Friday at its lowest since Jan. 4.

March gasoline

fell 1.6% at $2.2842 a gallon, while March heating oil

was down 3.2% at $2.6872 a gallon.

March natural gas

fell 0.7% to $2.393 per million British thermal units, after dropping more than 15% last week and finishing Friday at its lowest since Dec. 28, 2020.

Market drivers

Oil slumped last week as traders remained uncertain about the global demand outlook, including the scope for increased consumption from China following the Lunar New Year. Another large jump in U.S. stockpiles of crude also weighed on prices, analysts said.

The European Union on Sunday imposed a ban on Russian refined energy products, following on an earlier ban on seaborne Russian crude.

“The ban will have the largest impact on Russian diesel and naphtha flows to the EU. However, EU buyers have had time to prepare for the ban. In the period leading to the cutoff, there were increased flows of middle distillates to the EU and this has helped to push gas oil inventories in the ARA (Amsterdan-Rotterdam-Antwerp) region back up towards the 5-year average,” said Warren Patterson and Ewa Manthey, commodity strategists at ING, in a Monday note.

U.S. Treasury Secretary Janet Yellen on Friday said industrialized countries in the Group of Seven were imposing a price cap on refined Russian oil products such as diesel and kerosene, as part of a coalition that includes Australia and a tentative agreement from the European Union. A similar cap was previously placed on Russian oil exports, with the aim of reducing the financial resources available to Russian President Vladimir Putin to wage the nearly yearlong war in Ukraine.

The G-7 set a price cap of $100 on so-called “high-value” Russian exports such as diesel and gasoline and $45 on “lower-value” products such as fuel oil. 

The price caps are above the market price for reformulated gasoline and nearly in line with the market price for diesel, said Troy Vincent, senior market analyst at DTN. “It is unlikely that the caps will have a material impact on global supply.”

Oil prices were lower despite news reports that a major earthquake halted operations at Turkey’s oil terminal in Ceyhan and flows through Iraq’s northern oil export pipeline from Kirkuk. Turkish pipeline operator BOTAS said there was no damage on main pipelines carrying oil from Iraq and Azerbaijan to Turkey, Reuters reported.

Meanwhile, natural gas failed last week to benefit from a short-lived cold snap that brought extremely low temperatures to the U.S. Northeast.

“After a couple nights of record temps in New England, heating demand disappeared as fast as it appeared,” wrote analysts at the Schork Report on Monday.

Nearly three-fifths of the way through heating season, the market has delivered 1.061 trillion cubic feet (tcf) of gas out of underground storage in the Lower 48 U.S. states — less than half of last summer’s 2.262 tcf injection, they said. If nothing happens to change the trajectory, storage is on track to end winter around 1.742 tcf, well above the Energy Information Administration’s forecast of 1.493 tcf and last year’s ending balance of 1.382 tcf, the analysts wrote.

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