February 5, 2024
Energy commodities prices were in turmoil this week, upon an EIA report and geopolitical concerns in Middle East.
WTI futures fell as drillers slow
- Oil prices fell more than 5% the previous week, which was the steepest weekly decline since November, amid reports that talks are being held for a ceasefire in the hostilities between Israel and Hamas.
- Furthermore, crude oil prices retreated sharply amid broader negative sentiment in the market after the Fed left rates unchanged and dashed hopes for a rate cut anytime soon.
- Additionally, ongoing concerns about China’s economic recovery added to the downward pressure, with the IMF predicting a slowdown in growth to 4.6% in 2024 and around 3.5% in 2028, further impacting crude demand.
- On the supply side, oil rigs increased, adding an extra 2 rigs (totaling 499), but remain far lower than the previous year’s data, 609. Production rates in the U.S. are still down by 200k bpd since the start of the year.
Gasoline prices squeezed by consecutive buildups
- Gasoline futures in the US extended losses to below $2.15 per gallon, the lowest in over two weeks, pressured by declining oil prices and a rise in weekly inventories.
- Gasoline stocks strengthened for 5th time in a row, reaching a historical 3 -year high level.
- The EIA report showed a 1.156 million barrel increase last week, lower than market expectations of a 1.483-million-barrel buildup.
- Additionally, traders were optimistic that a ceasefire agreement between Israel and Hamas in Gaza could halt Houthi attacks on Red Sea shipping, which have disrupted global trade and oil flows in the region.
Storage data affects LNG prices
- US natural gas futures fell below $2.1/MMBtu, nearing their lowest point in nine months after the EIA’s storage report.
- Government data showed US utilities pulled 197 billion cubic feet of natural gas from storage last week, compared with market expectations of a 194 bcf draw.
- The report also showed gas in storage remains 5.1% above the seasonal norm.
- Additionally, heating demand is expected to stay low amid warmer weather forecasted through mid-February, restricting withdrawals in the upcoming weeks.
- Also, the ongoing shutdown of a liquefaction unit at Freeport LNG’s export plant in Texas means more gas will remain in the country.