In trading on Monday (18th), crude oil futures prices were divergent. Brent crude oil closed down for the first time in 3 trading days, while WTI crude oil, after hitting a multi-year high, gave up early gains, but still closed higher.
An analyst said that high crude oil prices have increased the possibility of disruption in energy market demand.
At the same time, natural gas prices fell by nearly 8% on Monday, as the weather forecast improved, which helped ease market concerns about energy supply in the winter.
Phil Flynn, senior market analyst at the Price Futures Group, said that due to recent multi-year high prices, the volatility of the oil market may increase. However, from the perspective of supply versus demand, all news is bullish.
He pointed out that OPEC’s oil production is lower than expected, but as the travel ban on passengers entering the United States will be lifted, the demand for aviation fuel should rise.
“On the other hand, we have seen that high energy prices are slowing the economy in China and other regions, so we must be vigilant for signs of demand destruction, especially if prices continue to soar.” Flynn said.
According to China’s economic data, GDP in the July-September quarter grew by 4.9% year-on-year, which was a sharp drop from the previous quarter’s annual growth rate of 7.9%. This was due to the impact of slowing construction activities and energy shortages that led to factory output restrictions.
Flynn said that oil prices are likely to continue to rise for a long time, but it is not surprising to see a slight correction in the process.
- WTI crude oil futures for November delivery rose 16 cents, or nearly 0.2%, to close at US$82.44 per barrel, with an intraday high of US$83.87, which was an unprecedented high for the most recent monthly contract since 2014.
- The price of Brent crude oil futures for December delivery fell by 53 cents or 0.6% to close at US$84.33 per barrel, with an intraday high of US$86.04, which is not far from the September 2018 high of US$86.74. If this level is exceeded, the Brent crude oil trading price It will also come to a 7-year high.
Coal and natural gas prices soar, power plants switch to oil
The impetus for crude oil to rise this month also comes from concerns about the soaring prices of coal and natural gas, especially when power plants in Asia begin to burn oil, making the market more worried about tight oil supplies.
The U.S. Energy Information Administration (EIA) reported on Monday that coal-fired power generation in the United States is expected to achieve its first annual growth since 2014, and this year is up 22% from last year, citing rising natural gas prices.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that WTI and Brent crude oil both rose in early trading on Monday, “reflecting the positive seasonality of energy prices as the winter approaches. As the temperature begins to drop, investors may think about heating up. Demand, especially in Europe where energy supply is already facing crisis.”
However, natural gas fell sharply on Monday, falling below $5 for the first time since September 23.
- The price of natural gas futures for November delivery plummeted 7.8% to close at US$ 4.989 per million Btu. It closed down 2.8% last week, but as of last Friday, the month’s increase was still 7.8%.
Christin Redmond, a commodity analyst at Schneider Electric, believes that the sharp drop in natural gas on Monday was due to “short-term weather forecasts picking up and suppressing demand expectations and falling.” He cited the US National Oceanic and Atmospheric Administration’s 6 to 10 day weather forecast.
“This should reduce the initial heating demand and make market supply and demand more accommodating. Before the start of the supply withdrawal season, the shortage of storage can be further reduced.”
Earlier on Monday, there were reports that Russia’s Gazprom might not send more supply to the market as expected, and then temporarily boosted early natural gas prices.
At the same time, OPEC+ continued its efforts in September to increase production as planned. OPEC+ previously agreed to relax the 400,000 barrels per day production limit.
Foreign media reported that OPEC+’s compliance with September’s production cut reached 115%, a drop from August’s 116%. Warren Patterson, head of commodity strategy at ING, reported that some OPEC+ members have difficulty increasing production due to lack of operational capabilities or other production-related issues.
“The OPEC + production cut agreement has exceeded the compliance level, which makes the crude oil supply still tight.” He quoted Bloomberg data to show that compared with the agreed production limit, OPEC+’s crude oil production in September this year was less than about 740,000 barrels per day.
Other energy commodity trading
- The price of gasoline futures for November delivery was almost flat, closing at nearly $2.487 per gallon.
- The price of hot fuel oil futures for November delivery fell nearly 1% to close at $2.549 per gallon.
