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Oil futures finish lower Monday after touching highest intraday level of 2019

By Myra P. Saefong / MarketWatch

Petroleumworld 02 04 2019

Oil futures finished lower Monday, after briefly touching their highest intraday levels of the year, with prices giving up some of the gains they scored last week as concerns over a potential slowdown in energy demand resurfaced.

“There have been a lot of shifting pieces in the oil market to start 2019 as a dovish [Federal Reserve], and subsequently weaker dollar, sanctions on Venezuela, and solid January jobs data all supported energy gains last week,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch.

“But demand concerns were reignited [early Monday] following the release of surprisingly weak Chinese and U.S. economic data, and as a result, futures gave back all of last week's gains in early trade,” he said. “The strong jobs report was priced in with Friday's sizeable rally, but traders seem to have already looked past the data and onto the most recent global releases, which were on balance, disappointing.”

Those included the “surprisingly soft Chinese General Services PMI for January released overnight, which showed the Composite level dip to 50.9 from 52.2 in December, barely holding expansion territory,” said Richey. “That report was then followed up by a whiff in the delayed release of the U.S. factory orders data from November , which pushed prices down to their morning lows.”

The path of least resistance for oil prices is still higher for now, with a near-term target of $57 a barrel in WTI, he said. “However, without the demand side of the equation at least holding steady…it will be hard for oil prices to continue to grind higher in the weeks ahead.”

West Texas Intermediate crude oil for March delivery US:CLG9 fell by 70 cents, or 1.3%, to settle at $54.56 a barrel on the New York Mercantile Exchange, after tapping a high of $55.75. The contract settled up 2.7% to $55.26 a barrel Friday, with prices tracking the front-month contracts logging their highest finish since Nov. 19. The month of January saw WTI crude rise 18.5%, and 2.9% on the week, according to Dow Jones Market Data.

April Brent LCOJ9, +0.11% fell 24 cents, or 0.4%, to $62.51 a barrel on ICE Futures Europe, after reaching a session peak of $63.63. It rose 3.1% to $62.75 a barrel Friday. Prices based on the front-month contract gained 15% in January and about 1.8% last week.

The intraday highs for both crude benchmarks were the loftiest so far this year and, after posting hefty gains in January and climbing last week, analysts said prices hit resistance levels.

“The key resistance levels in WTI and Brent…$55 and $65—remain intact for now,” said Craig Erlam, senior market analyst at Oanda. “A clear break has not yet happened.”

Fundamental factors, however, remain mostly supportive. Baker Hughes BHGE, +0.94%  on Friday reported that the number of active U.S. rigs drilling for oil fell by 15 to 847 this week. That more than offset the increase of 10 in the oil-rig count from a week earlier.

And analysts were also optimistic that more Venezuela oil production will come off the market thanks to U.S. sanctions. The Trump administration unveiled sanctions on Venezuela's state-owned oil firm Petróleos de Venezuela SA last week in an effort to cut off money to President Nicolás Maduro, days after opposition leader Juan Guaidó declared himself interim president of the country. The political turmoil raises the risk of disruption to Venezuela's oil output.

“OPEC oil production fell sharply in January thanks to compliance with the production cuts and involuntary declines in Iran, Libya and Venezuela,” said analysts at Commerzbank, citing data from Reuters and Bloomberg. The analysts added that EU sanctions against Venezuela may be forthcoming after it failed to meet an ultimatum from the region.

Still, some analysts have pointed out that the sorry state of its oil industry may have only a limited impact on the global crude market.

Elsewhere on Nymex, March gasoline US:RBG9  fell 0.3% to end at $1.432 a gallon, and March heating oil US:HOG9  shed 0.3% to $1.907 a gallon.

March natural gas NGH19, +0.34% lost 2.7% to $2.66 per million British thermal units, after falling 2.8% to $2.734 on Friday. Front-month contract prices suffered their lowest finish since July, after ending last month with a loss of 4.3%. For the week, they marked a loss of 11%.


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Story by Myra P. Saefong from MarketWatch.

02 01 2019 20:58 GMT

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