Crude Oil Slides Again
West Texas Intermediate (WTI) and Brent crude oil futures fell for the third straight session Monday while natural gas futures posted an impressive gain.
The February WTI contract lost $1.08 Monday, settling at $50.51 per barrel. It peaked at $52.11 during the early week session and bottomed out at $50.38.
Brent crude oil for March delivery ended the day below the psychologically significant $60-mark Monday, settling at $58.99 per barrel. The benchmark lost $1.49 during the session.
Crude futures declined amid reports of negative economic news from China.
“The world’s second-largest economy, and largest consumer of oil, reported a decline in its imports and exports for December,” Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business, told Rigzone. “A resultant drop in global and U.S. stocks has put downward pressure on oil prices.”
Although the WTI managed to stay above its critical support level of $50 Monday, the Brent slipped below the important $60 threshold, Seng noted. He added that a slightly lower U.S. dollar did not help matters.
“On the ‘bullish’ side, the OPEC+ group is still determined to reduce their output according to the decision made last year,” continued Seng. “Traders will now be watching the key inventory reports coming from the American Petroleum Institute tomorrow afternoon and the Energy Information Administration Wednesday morning.”
Seng also pointed out that, from a technical standpoint, February crude futures are trading “right around” their five-day moving average (MA) but “well above” their 10- and 20-day MA levels. In addition, he said that oil futures are still in a “neutral” position relative to “overbought/oversold” conditions.
“Volume continues to be heavy, with over 700,000 futures contracts being traded for several days now,” added Seng.
Front-month reformulated gasoline (RBOB) also declined Monday. The February RBOB contract price settled at $1.36 per gallon, reflecting a four-cent loss from the previous session.
“Unleaded gasoline continues to trade in lock-step with WTI, losing ground for the third straight day as well,” remarked Seng.
Posting a major gain Monday was Henry Hub natural gas. February gas futures rose 49 cents to end the day at $3.59. Seng pointed out that a rare, technical event called a “gap-up” occurred – amounting in this case to approximately 22 cents – when Globex trading began at approximately 5 p.m. Eastern time Sunday.
“These gaps in prices normally occur when some event occurs outside of the trading hours of NYMEX, and so traders play ‘catch-up’ once the exchange resumes trading in the next session,” Seng explained. “No doubt the cold blast that blanketed the U.S. Southeast and Middle Atlantic regions played a hand in that.”
Natural gas inventories also remain historically low for this time of year, Seng said. Technically, February natural gas surged to trade above its 20-day MA and far higher than its five- and 10-day MA levels, he added.
“Large volume traded today, but the contract is decidedly ‘neutral’ relative to oversold/overbought conditions,” Seng concluded.
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