Oil prices score back-to-back monthly gains

Oil futures failed to shake off weakness during Thursday’s session after a fifth straight monthly rise in U.S. crude inventories, but managed to score back-to-back monthly gains on lingering risks to global supplies.

Price moves

  • West Texas Intermediate crude
    for April delivery

    fell 28 cents, or 0.4%, to settle at $78.26 a barrel on the New York Mercantile Exchange. Prices based on the front month posted a monthly rise of 3.2%.

  • April Brent crude
    the global benchmark, edged down 6 cents, or nearly 0.1%, at $83.62 a barrel on ICE Futures Europe, on its expiration day. Front-month prices rose 2.3% for the month. May Brent

    the most actively traded contract, lost 24 cents, or 0.3%, at $81.91 a barrel.

  • March gasoline
    added 1.5% at $2.30 a gallon, for a monthly rise of 5.5%, while March heating oil
    climbed 1% to $2.68 a gallon, but tallied a monthly loss of 4.4%. The March contracts expired at the day’s settlement.

  • Natural gas for April delivery
    settled at $1.86 per million British thermal units, down 1.3% for the session and down 11.4% for the month.

Market drivers

For the month, U.S. oil prices climbed by more than 3%, despite the “various forces pulling and tugging at the global commodity,” said Lukman Otunuga, manager, market analysis, at FXTM.

Oil prices remain ‘trapped within a wide range, with a potent fundamental spark needed to truly shift the balance of power in favor of bulls or bears.’

— Lukman Otunuga, FXTM

Nevertheless, prices remain “trapped within a wide range, with a potent fundamental spark needed to truly shift the balance of power in favor of bulls or bears,” he told MarketWatch. “This could come in the form of more OPEC+ supply cuts, heightened geopolitical tensions or a positive surprise in China’s economic health, among other themes.”

Alan Shih, analyst for VanEck’s natural-resources equity strategy, said geopolitical risk continued to support prices in February, but “no supply has been disrupted as of yet.”

He said oil prices remain rangebound, as the Organization of the Petroleum Exporting Countries continues to curtail production and the market heads into a seasonal period of rising demand.

In the U.S. on Wednesday, the Energy Information Administration reported that domestic commercial-crude inventories rose by 4.2 million to 447.3 million barrels for the week ending Feb. 23.

The report also showed weekly supply declines of 2.8 million barrels for gasoline and 500,000 barrels for distillates.

The data showed a continued rebound in gasoline supplied, a key measure of implied consumer demand, wrote Tyler Richey, co-editor at Sevens Report Research. The metric hit its second-highest level since mid-December at just shy of 8.5 million barrels a day, he said.

“A better consumer-demand outlook is supportive of prices near term.” said Richey.

Analysts have recently pointed out that WTI and Brent oil futures are in backwardation — a situation in which prices for oil for delivery in the near future are higher than those for later delivery, signaling that global supplies have tightened.

“One potential factor contributing to the considerable backwardation in the term structure of the futures market is the fact that the Biden administration has added to the Strategic Petroleum Reserve for 12 out of the last 14 weeks, taking barrels out of the commercial market and into government storage,” said Richey. “The amount of the SPR adds has been relatively low, but it does seem to be contributing to the rally in active-month futures and increasingly backwardated futures term structure.”

In other energy news Thursday, data from the EIA showed that U.S. natural-gas supplies in storage declined by 96 billion cubic feet for the week ended Feb. 23. On average, analysts forecast a decline of 90 billion cubic feet, according to S&P Global Commodity Insights.

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