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Oil futures mark highest settlement of the year

By Myra P. Saefong and Georgi Kantchev

Published: Mar 7, 2016 3:18 p.m. ET


WTI and Brent crude prices turn higher year to date

Oil futures rallied on Monday, posting their highest settlements of the year, on hopes that major producers will curtail supply and as stronger economic data fueled hopes of improving demand.

April WTI crude CLJ6, -0.21% climbed by $1.98, or 5.5%, to settle at $37.90 a barrel on the New York Mercantile Exchange. Based on the most-active contracts, prices settled at their highest since Christmas Eve and year-to-date, prices are now about 2.3% higher, according to FactSet data.

May Brent crude LCOK6, +5.45% the global oil benchmark, rose $2.12, or 5.5%, to $40.84 a barrel on London’s ICE Futures exchange, with prices also logging the highest settlement since early December.

Read: The last time oil rallied like this it didn’t end well for the bulls

“The market is getting more bullish as the damage caused by the oil price crash is becoming apparent and is forcing the market to look beyond the current glut to a world with falling production,” said Phil Flynn, senior market analyst at Price Futures Group, in a note. “The bulls have regained control of this market that is now up 40% from its 2016 lows.”

On Monday, the United Arab Emirates’ energy minister said that current prices are forcing all suppliers to freeze their production.

“It doesn’t make any sense for anyone to increase the production with the current prices,” Suhail al-Mazrouei told reporters on the sidelines of an aerospace conference in Abu Dhabi. “This is all good news for balancing the market. We just need to be patient.”

Opinion: Oil stocks’ latest big rally is no gusher

Oil futures have climbed steadily in recent weeks after Russia, Saudi Arabia, Venezuela and Qatar agreed last month to freeze their output at January levels in an effort to support prices. Brent is up more than 7% so far this year.

The agreement, however, was contingent on other Organization of the Petroleum Exporting Countries and non-OPEC members joining the plan and Iran quickly dismissed the notion.

“The big risk is that the meeting proves a disappointment and prices fall back sharply on any lack of further progress,” said Barclays analyst Kevin Norrish.

Still, oil has received support from other signs of falling supply.

On Monday, a monthly report from Energy Information Administration forecast that U.S. shale oil output will fall 106,000 barrels a day in April from March to total 4.871 million barrels a day.

Industry group Baker Hughes BHI, +0.82% on Friday reported that the number of rigs drilling for crude oil in the U.S. dropped by eight to 392, the lowest level since 2009. Rig counts are seen as a rough proxy for activity in the industry.

Read: A rally in commodities may be a sign that Wall Street has hit a bottom

The market will be taking further cues from China’s February trade data report and the EIA’s short-term energy outlook, both set for release Tuesday, the weekly U.S. report on crude inventories and production to be issued Wednesday, and the International Energy Agency’s oil report due Friday.

Back on Nymex, April gasoline RBJ6, -0.06% finished at $1.393 a gallon, up 6.1 cents, or 4.6%, while April heating oil HOJ6, +0.03% tacked on 6.1 cents, or 5.3%, to $1.223 a gallon. Both commodities saw their highest settlements of the year.

April natural gas added 2.4 cents, or 1.4%, to $1.69 per million British thermal units. Last week, prices hit their lowest levels in 17 years.

— Jenny W. Hsu and Nicolas Parasie contributed to this article.

http://www.marketwatch.com/story/crude-prices-add-to-gains-in-an-increasingly-bullish-market-2016-03-07