Oil futures climbed on Monday to post their highest finish in more than two years, as signs of a demand recovery in the U.S. and Europe fed optimism over the outlook for energy demand, despite a round of weaker-than-expected economic data from China.
“The market appears to remain focused on longer-term optimism tied to strong demand recovery in the U.S., Europe and much of Asia,” said Robbie Fraser, global research and analytics manager at Schneider Electric, in a note.
West Texas Intermediate crude for June delivery
CL00,
July Brent crude
BRN00,
Weakness in the U.S. dollar contributed support to dollar-denominated prices of oil, said Troy Vincent, market analyst at DTN. The ICE U.S. Dollar Index
DXY,
That, “combined with the fundamental outlook of continued draws to global inventories heading into the summer, is helping keep Brent in its comfortable $65-$72 range despite some recent disappointing economic data points globally,” Vincent told MarketWatch.
Baker Hughes
BKR,
U.S. rig counts picked up a bit in the past week of data, but oil production levels “have yet to see a meaningful bounce in the face of higher prices and should be closely watched over the coming weeks,” said Fraser.
Meanwhile, China said retail sales in April were up 17.7% from the pandemic-suppressed level seen a year earlier, compared with a 34.2% rise in March, The Wall Street Journal reported. April industrial production rose 9.8% year over year in April, after a 14.1% rise in March, while fixed-asset investment decelerated to 19.9% in the January-April period versus 25.6% in the first quarter.
Still, analysts said oil appears to be underpinned by optimism over the demand outlook for the second half of the year, a view reinforced by monthly forecast updates last week from both the Organization of the Petroleum Exporting Countries, or OPEC, and the International Energy Agency.
“As we see it, the situation on the oil market is fairly stable at present, with robust demand offsetting the increased supply from OPEC+ and possibly also from Iran, which is presumably preparing itself just now for the U.S. sanctions to be eased or even lifted” as negotiations continue around the Iran nuclear agreement, said Eugen Weinberg, analyst at Commerzbank, in a note.
“In a joint assessment by the leading energy agencies, not even the ongoing problems in India, the world’s third-largest oil importer, will be able to derail the recovery of demand,” he wrote. “Given the large number of short-term factors, we expect the volatile sideways trend of the oil price to continue.”
Among other energy futures traded on Nymex, June gasoline
RBM21,
Natural-gas futures rallied on Monday, with the June contract
NGM21,
Henry Hub natural-gas futures surged Monday “after breaking out from a major level of technical resistance amid strength in [liquid natural gas] exports, lower inventory builds,” and U.S. temperatures rise after an otherwise cool spring, boosting demand prospects for natural gas, said Vincent.
“While technically this opens the door for a run up” to the $3.38 level, with
inventory levels remaining high and gas-to-coal switching likely to pick up as gas prices move above $3, “a move to 2020 highs should be temporary,” he said.