Oil futures rose Tuesday, underpinned by continued optimism over the demand outlook from China after the country dropped COVID restrictions.
Natural-gas futures extended a bounce after forecasts pointed to a turn back to colder U.S. weather.
- West Texas Intermediate crude for March delivery rose 23 cents, or 0.3%, to $81.85 a barrel on the New York Mercantile Exchange.
- March Brent crude the global benchmark, was up 13 cents, or 0.1%, at $88.32 a barrel on ICE Futures Europe. April Brent the most actively traded contract, was up 10 cents, or 0.1%, at $88.26 a barrel.
- Back on Nymex, February gasoline fell 0.6% to $2.68 a gallon, while February heating oil gained 0.4% to $3.452 a gallon.
- February natural gas rose 2.6% to $3.538 per million British thermal units, ahead of its Friday expiration. March natural gas the most actively traded contract, was up 1.1% at $3.256 per million BTUs.
Crude oil prices saw a mixed finish Monday, with WTI losing ground as Brent extended its winning streak to a third session. Expectations for a pickup in crude demand from China has served to support crude since beginning the year with a dip.
Continued weakness for the U.S. dollar, which has seen the ICE U.S. Dollar Index slip 1.4% to begin 2023, has also provided support for commodities priced in the unit. A weaker dollar makes them less expensive to users of other currencies.
Some analysts contend crude’s gains remain underwhelming relative to other commodities.
Expectations for a recovery in Chinese demand “have yet to translate into substantial gains for crude oil, whose rebound has been somewhat tame compared with other commodities such as copper, amid some concerns about how smooth China’s reopening will be,” said Raffie Boyadjian, lead investment analyst at XM, in a note.
WTI is up 2.1% so far in January, based on the most actively traded contract, while Brent has risen 2.8%. Copper has jumped nearly 12% over the same stretch.
Natural gas has rebounded after a sharp slump to begin the year amid unseasonably warm temperatures across much of the U.S. Natural-gas remains down more than 20% so far in January, after a selloff that left the commodity deeply oversold and vulnerable to a short-covering rally, wrote analysts at Sevens Report Research.
“Looking ahead, more volatile trade is likely with the market susceptible to squeezy rallies, but the current trend is decidedly bearish right now with a break below $3.00 a distinct possibility in the months ahead,” they wrote.