Oil Climbs Above $71 on Weather, Geopolitical Tensions

  • NYMEX crude up 70 cents to $71.89
  • NYMEX natural gas (Henry Hub) down 11 cents to $5.401
  • NYMEX refined gasoline futures up at $1.8940
  • All three commodities still trading under March front-month contract

Reversing a steep sell off after three consecutive sessions on the downside, crude oil futures on the New York Mercantile Exchange saw an uptick in trading Monday as concerned investors abandoned the dollar's safe havens to bet on riskier markets.

As the U.S. currency weakened today, the price of light, sweet crude oil for March delivery added 70 cents to Friday's lower price tag to settle higher at $71.89 a barrel. On the opposite side of the energy coin, March natural gas spot prices at the Henry Hub retreated by 11 cents to $5.40 per thousand cubic feet.

Helping to spur prices in the oil complex, a bout of unseasonably cold weather is forecast to drop temperatures across the Midwest and Northeast this week. According to the National Weather Service, heating oil demand should be 11.5% above normal.

Moreover, international demands to sanction Iran, as well as an additional attack on a Shell-operated oil pipeline in Nigeria, accelerated short covering for NYMEX oil futures.

Arguably triggering a free-fall, domino effect across the commodities spectrum last week, the equities market lost further ground today as traders on Wall Street eyed the euro zone's financial struggles. Both the Dow and S&P 500 indexes ended down on the session.

"Last Friday, you had such a sharp sell off [in crude], but underlying the market, not a whole lot has changed," said Bill O'Grady, the chief markets strategist at St. Louis-based Confluence Investment Management, LLC.

"The situation of the markets when prices were above $80 is about the same as it is now that we're in the low $70s, and every time we dip under the latter, you start to see more buying coming in, which is very typical of a range-bound market," the analyst explained.

O'Grady did point to colder weather as an impetus for higher energy prices in general, but conceded that this factor does not necessarily provide a substantial amount of support for oil in particular.

Also climbing alongside crude oil today, NYMEX gasoline futures for March delivery closed slightly higher to $1.89, or just under its recent $2-threshold.

"Gasoline consumption usually picks up in [late February] when it makes its seasonal trough and rises steadily into summer," O'Grady noted.

"However, the economic recovery is still slow and even with the recent drop in the unemployment rate, labor markets are still relatively depressed, so I suspect we will follow last year's demand pattern where we did see some increases, but it will probably still be below normal," the analyst predicted.