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Crude oil futures rose Friday and for the week, with WTI crude pushing past $80/bbl before paring gains to close at its highest settlement price since November, marked by rising tensions in the Middle East and expectations that OPEC will extend production cuts into Q2.
Hopes for a ceasefire in a Gaza suffered a setback as a strike by Israeli forces Thursday reportedly killed more than 100 Palestinians waiting for food aid, including many trampled in the crush.
OPEC+ countries were considering an extension of the cuts, which amount to 2.2M bbl/day, into Q2 and possibly to the end of the year, Reuters reported earlier this week, adding that a decision is expected in the first week of March.
Rising non-OPEC supply and persistent concerns about China’s demand outlook have restrained the oil rally, but “$80 has been a psychological level for crude, and holding this level could provide some positive momentum,” CIBC Private Wealth’s Rebecca Babin told Bloomberg.
Front-month Nymex crude oil (CL1:COM) for April delivery finished +2.2% on Friday at $79.97/bbl, after hitting $80 for the first time since early November and then settling at its best value since November 6, while front-month May Brent crude (CO1:COM) closed +2% to $83.55/bbl; for the week, WTI jumped 4.5% and Brent gained 3.4%.
Meanwhile, front-month Nymex April natural gas (NG1:COM) ended the week up 8% to $1.835/MMBtu, snapping a four-week losing streak.
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“Sticking to the voluntary production cuts until the end of the year would be a strong signal and should therefore be seen as price-positive,” although an extension only into Q2 likely has been priced in and should not move prices significantly, Commerzbank analyst Carsten Fritsch said.
After announcing an extension of the current cutbacks in the coming days, OPEC+ likely will gradually add back barrels into the market at its next ministerial meeting on June 1, J.P. Morgan’s Christyan Malek said, as an output revival “after a protracted period of cuts represents a tipping point for oil markets given this should indicate strong future demand.”
The oil market is “well balanced” with prices well supported in the high $70s and a path to the $80s in sight if “OPEC+ confirms rollover of its cuts and once the [U.S. Federal Reserve] clarifies timing for rate cuts,” Velandera Energy Partners’ Manish Raj told Marketwatch.
The oil and gas sector, as represented by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), closed +1.3% for the week.
Top 10 gainers in energy and natural resources in the past 5 days: Sigma Lithium (SGML) +38.7%, Nuscale Power (SMR) +32.7%, Lithium Americas (LAC) +31.4%, Plug Power (PLUG) +29.2%, Adams Resources (AR) +28.3%, Constellation Energy (CEG) +26.8%, Piedmont Lithium (PLL) +25%, Daqo New Energy (DQ) +23.7%, Lithium Americas Argentina (LAAC) +23.2%, Albemarle (ALB) +18.3%.
Top 5 decliners in energy and natural resources in the past 5 days: Chemours (CC) -29.5%, Flux Power (FLUX) -17.9%, Xcel Energy (XEL) -16.4%, MV Oil Trust (MVO) -10.7%, Nouveau Monde Graphite (NMG) -10.4%.
Source: Barchart.com