U.S. oil ekes out a gain as futures close out declines for month, quarter and year

Oil futures on Monday managed a slight gain in the final trading day of a volatile 2018 that finds energy benchmarks down sharply from their highs of the year.

Trading was choppy due to low volumes on New Year’s Eve, market participants said.

West Texas Intermediate crude for February delivery CLG9, +1.24% picked up 8 cents, or 0.2%, to $45.41 a barrel, but had been as high as $46.53 a barrel. Futures ended off 10.8% for December, down 38% over the quarter, and 24.8% for 2018, according to Dow Jones Market Data.

The global benchmark, March Brent crude UK:LCOG9 gained 59 cents, or 1.1%, at $53.80 a barrel, with an intraday high at $54.82. It is down by more than 8% for December, 35% for the quarter, and off 19.5% for the year.

“It’s a thin market and we are seeing the commodities come down here on no real catalyst,” Ed Moya, senior market analyst at Oanda, told MarketWatch. “Most of the people that I usually talk to are away on holiday,” he said. Most major markets will be closed on New Year’s Day Tuesday.
Oil market participants will be watching the Organization of the Petroleum Exporting Countries and its allies, led by Russia, closely as 2019 gets under way. OPEC — essentially led by Saudi Arabia — and its production partners outside the cartel agreed in early December to begin limiting crude output by a collective 1.2 million barrels a day at the start of January.

Algeria’s energy minister said Sunday he was confident oil prices will return to between $65 and $70 a barrel by April, but indicated that the OPEC alliance would cut production further if the market had not responded by then, the country’s official APS agency said, according to a report by S&P Global Platts.

The official, Mustapha Guitouni, said he believed the $65-$70 to be the Goldilocks price — optimal for producers and consumers — even though OPEC has repeatedly emphasized it doesn’t target prices but focuses on supply-and-demand fundamentals, with stock levels being a guide to market balancing, the report said.

So far, the deal, and signs of stronger U.S. contributions, haven’t had the intended effect of quieting market jitters about oversupply and boosting prices.

“The key swing producers within OPEC+ do have meaningful spare capacity and are able to use it if they deem it necessary,” analysts at JBC Energy wrote in a note Monday. “That said, it is nonetheless a difficult tool to use correctly in a world where forecasters tend to routinely underestimate U.S. production by several hundred thousand barrels per day.”

As for the U.S. picture, the Energy Information Administration reported Friday that domestic crude supplies fell by 46,000 barrels for the week ended Dec. 21. Gasoline stockpiles rose by 3 million barrels last week, while distillate stockpiles were virtually unchanged, according to the EIA.

That data contrasted with a late Thursday report from American Petroleum Institute, which indicated an inventory build of 6.9 million barrels for the same week, which was more than twice estimates for a build of around 3 million barrels.

Lately, battered crude prices have moved in lockstep with those of stocks, with recent gains in stock markets being credited to signs of trade progress between the U.S. and China.

In other Monday energy trading, February natural gas NGG19, -9.84% shed 36.3 cents, or 11%, to end at $2.94 per million British thermal units. The commodity finished the month off 36.3%, marking the sharpest monthly drop since March of 2003. For the quarter, futures lost 2.3% but ended the year with a slight, 0.4%, annual drop.

Meanwhile, February gasoline RBG9, +1.25% rose less than 0.1% to end at $1.3021 a gallon. February heating oil HOG9, +1.83% tacked on 1.9 cents, or 1.1%, to settle at $1.6794 a gallon.

MarketWatch

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya