Market Fluctuations
Crude oil futures witnessed a decline this week, after recent gains, influenced by hawkish Federal Reserve meeting minutes and cautious statements by Fed officials, which tempered expectations for interest rate cuts that could potentially bolster energy demand.
Fed Gov. Chris Waller’s remark that there was “no rush” to lower rates, coupled with strong inflation and economic data, contributed to the downward pressure on prices.
Supply and Geopolitical Concerns
The U.S. reported an increase in domestic crude stocks, low refinery runs, and near-record production levels at 13.3 million barrels per day, overshadowed by concerns that the Federal Reserve may maintain high interest rates for an extended period.
Notably, escalating geopolitical tensions in the Middle East were insufficient to support prices as they are not currently constraining global supplies but rather adding to uncertainties in the market.
Sturdy Oil Demand
Despite the influence of high interest rates, demand for oil has remained robust, driven by increased travel demand in China and Europe. J.P. Morgan’s data indicates a steady rise in oil demand, with indicators pointing to a month-over-month increase, highlighting the resilience of the market amidst economic challenges.
Front-month Nymex crude for April delivery settled at $76.49, reflecting a weekly decline of -2.5%, while Brent crude closed at $81.62/bbl, marking a -2.2% decrease for the week.
Natural Gas Market
Conversely, U.S. natural gas futures faced volatility following Chesapeake Energy’s plans to curtail drilling and production in response to declining prices and subdued demand. Price fluctuations were further exacerbated by weather forecasts pointing to lesser demand, particularly at the end of the heating season.
Front-month Nymex March natural gas witnessed a week-long decline, closing at $1.603/MMBtu after a 7.4% drop on Friday, reflecting a 40.9% plunge over the last four weeks.
In Europe, natural gas prices have been on a continual decline, reaching their lowest level since May 2021. The weak demand, attributed to mild weather and the sluggish economy, has led to surplus storage levels, further contributing to the downward pressure on prices.
Market Speculations
Analysts foresee benchmark TTE gas prices in Europe to escalate by year-end as the region’s economy recuperates gradually. Commerzbank projects prices to reach 35/MWh, anticipating an upward trajectory amidst the economic recovery.
Performance Indicators
The Energy Select Sector SPDR ETF closed the week at +0.5%, indicating a mixed performance in the energy and natural resources sector. Notable gainers include Western Midstream Partners (+17.5%) and Korea Electric Power (+15.4%), while decliners such as Fluence Energy (-29%) and Bloom Energy (-28.3%) faced significant setbacks.
Source: Barchart.com
