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Oil ends lower Monday on signs of fresh China weakness; natural-gas prices jump 16%

By Myra P. Saefong / MarketWatch

Petroleumworld 01 14 2019

Oil futures on Monday fell for a second straight session as global equity markets pulled back on further signs of weakness in China, the world's second-largest economy.

Prices for natural gas, meanwhile, jumped by roughly 16% to a more than one-week high, as colder weather boosted demand for the heating fuel.

Time Natural Gas Feb 2019 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 US:NGG19 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0

West Texas Intermediate crude for February delivery CLG9, +0.46%  fell by $1.08, or 2.1%, to settle at $50.51 a barrel on Monday on the New York Mercantile Exchange. It had fallen Friday but nonetheless notched a weekly rise of about 7.6%, according to Dow Jones Market Data.

March Brent crude LCOH9, -1.92% fell $1.49, or 2.5%, to $58.99 a barrel on ICE Futures Europe, after prices last week logged a weekly gain of 6%.

Weak economic data from China raised “concerns of slowing global growth, especially after weak industrial output data from Europe,” said Phil Flynn, senior market analyst at Price Futures Group, in a note. “It also raises the question of whether or not the Chinese stimulus, that has been announced, will be enough to ward off a major slowdown in the Chinese economy.”

“At the same time, it puts more pressure on China to get a trade deal with the U.S.,” he said. “That might be a bit harder after China reported that China's trade surplus” climbed in 2018.

Data showed weak China imports and exports for December , and China's trade surplus with the U.S. soared to a fresh record of $323.32 billion in 2018, amid Washington's trade spat with Beijing.

“Bottom line, China needs a deal if they are interested in stopping the free fall in their economy,” said Flynn. “While some argue they are playing the long game when it comes to this trade war, they really are going to have a hard time recovering if they let this linger much longer.”

China's weakness were credited with putting pressure on global stocks, including the Dow Jones Industrial Average DJIA, -0.36%  and the S&P 500 index SPX, -0.53%

In an interview with CNBC over the weekend , Mohammed Barkindo, secretary general of the Organization of the Petroleum Exporting Countries, said he is “concerned with the lingering trade disputes.”

“Any measures that may impact or constrain trade may likely impact on growth and by extension on demand for energy,” he said, adding that outside of the U.S., China and India “remain the brightest spots in terms of demand for energy.”

Last week, prices for oil futures rose to their highest levels since early December as data revealed declines in output from major oil producers. The price climb helped to propel oil out of a bear market, defined as a 20% decline from a recent peak.

Read: Oil prices are on the verge of busting above a bullish line in the sand—exiting bear market

Read: Here's how closely the stock market and oil prices are tracking each other

Also on Nymex Monday, February gasoline RBG9, +0.74%  fell by 2.6% to $1.364 a gallon, while February heating oil HOG9, +0.34%  shed 1.5% to $1.853 a gallon.

Meanwhile, February natural gas NGG19, +1.11%  settled at $3.591 per million British thermal units, up 15.9%. That was the highest settlement for a front-month contract since Dec. 27, and biggest single-session percentage gain since Nov. 14, according to Dow Jones Market Data.

“Weather continues to serve as the primary driver behind near-term price movements with a recent uptick in weather-related demand helping to send prompt gas prices sharply higher,” said Doug May, U.S. risk manager at Schneider Electric.

“Despite an uptick in colder temperatures for parts of the country, the overall outlook remains somewhat mild, with most forecast models projecting a continuation of weaker-than-normal storage withdrawals over the next two weeks,” he said. “If confirmed, that could look to challenge the strong support to start the week, with volatility likely to characterize short-term trading.”

--Christopher Alessi contributed to this article


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Reporting by Myra P. Saefong from MarketWatch.

01 14 2019 20:45 GMT

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