Crude oil futures are recording modest gains during the Presidents Day holiday. Energy commodities have been climbing on geopolitical tensions escalating at the Ukraine-Russia border, as well as another winter storm slamming into the United States. Is there any stopping oil and natural gas?
March West Texas Intermediate (WTI) crude oil futures advanced $0.73, or 0.8%, to $91.80 per barrel at 13:40 GMT on Monday on the New York Mercantile Exchange. US crude is coming off a weekly loss of more than 3%, but it is still up nearly 22% year-to-date.
Brent, the international benchmark for oil prices, is also rising to kick off the trading week. April Brent crude futures swelled $0.82, or 0.88%, to $94.36 a barrel on London’s ICE Futures exchange.
Natural gas is looking to top $5 with the March contract set to expire in the coming days. March natural gas futures soared $0.349, or 7.88%, to $4.78 per million British thermal units (btu). For 12 of the last 14 months, the expiring contract for natural gas futures has skyrocketed.
It was a volatile weekend on the geopolitical front. President Joe Biden confirmed that he would “in principle” meet with President Vladimir Putin. However, there have been reports that Russia is engaged in shelling and cyberattacks. Moreover, the issue in Eastern Europe is contributing to growing supply fears.
A broad array of research notes and industry reports point to the same thing: Supply is failing to keep up with demand.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, are refraining from significantly increasing production. US oil and gas firms have also slowed output growth because of regulatory uncertainties related to the president’s green agenda and efforts to preserve their balance sheets.
As a result, the consensus is that a barrel of oil could hit $115 this summer, with some financial institutions calling for as high as $125.
Therefore, the only relief in prices could be lower demand.
“While currently there is a lot of focus on geopolitical tensions pushing up oil prices, the fundamental fact is that [the] market is well undersupplied in 2022,” Credit Suisse’s Manav Gupta wrote in a note. “Even if geopolitical tensions ease over the next few weeks, near-term high oil prices are here to stay.”
In other energy commodities, March gasoline futures climbed $0.1566, or 5.87%, to $2.822 per gallon. March heating oil futures edged up $0.0105, or 0.38%, to $2.7598 a gallon.