Soaring to a five-week high during low-volume trading on the New York Mercantile Exchange Monday, U.S. crude oil futures edged closer to $80 a barrel as bullish momentum in the oil complex gathered steam on forecasts for colder weather that could accelerate seasonal fuel demand.
Extending its gains in a higher $75-$80 trading range today, the price of light, sweet crude oil for February delivery added 72 cents to its final price tag, ultimately closing at $78.77 a barrel. Earlier in the session, oil topped $79 -- the highest price since Nov. 23.
Additionally, heating oil futures burned brightest on the NYMEX as trading for the energy commodity was spurred by forecasters' expectations for icier weather across the nation. Citing DTN Meteorlogix, Reuters noted that temperatures in the U.S. Northeast, the world's largest heating oil market, could average "above normal" on Monday and subsequently ease to "below normal" heading into the weekend.
Oil Shifts on Less-Bearish Fundamentals
Exiting the Christmas holiday, the price per barrel of crude oil has continued its positive movement ahead of the new year, climbing more than 12% after testing $70 and paring a nine-day loss for the January front-month contract's expiry. Oil prices for Jan. delivery were trading close to $65 before bouncing back on significant drawdowns in crude oil stockpiles for year-end tax purposes.
"Crude oil is having an interesting end-of-the-year move," noted Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska.
"There was some talk last week that what we were beginning to see was a tax move in Texas, where they go ahead and refine crude oil instead of holding it in storage because you have to pay taxes to hold crude oil in storeage," Newsom explained, "and as a result we were seeing a pickup in refining.
"Now, that was one side of it," the analyst said. "The Feb-Mar spreads have also reacted in such a way that we've seen the contango really weakening, so there is some activity on the fundamental side, as well."
Moreover, a mixed bag of macroeconomic news also helped oil prices rise today. Specifically, oil found earlier support from news of a potential disruption in oil supplies en route from Russia to Eastern Europe. The market's optimistic outlook was further buoyed by improvements in China's fiscal health and industrial growth, as well as Saudi Arabia's championing of a $70-$80 range for oil prices -- a suitable level for producers, consumers and investors alike, according to the world's leading oil producer.
Bulls Charge on Natural Gas Market
Today, natural gas spot prices at the Henry Hub gained nearly 35 cents on the NYMEX to close at $5.99 per thousand cubic feet.
"Natural gas just keeps going," Newsom commented, "and has kept going since the end of September, when it gave a bullish technical signal that it was going to pull in some more money. There's still a large net-short futures position for spectators to cover, which is going to provide support for this market."
The analyst continued, "We hit $6 in the spot-month contract, and it looks as if we have money coming in from both sides of the market -- we've had investors and commercial buying coming in since the end of September, which has helped push the price up towards the $6-$6.15 trading range. That has certainly been the target area, and natural gas has the potential to rally up to $8 as long as the money keeps coming in."
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