Oil up for the week, down for the day as China concerns offset Middle East turmoil

Crude oil edged higher in rangebound trading this week, as concerns about China’s economy dampened the effects of Middle East fighting.

Analysts say slower than expected Q4 economic growth in China has renewed doubts about forecasts that demand there will drive global oil growth in 2024.

Concerns about China figure prominently in the fundamental pessimism of an oil market that has relied on geopolitical developments to eke out gains, CIBC Private Wealth energy trader Rebecca Babin said.

Meanwhile, the International Energy Agency said this week it expects an amply supplied market this year and raised its global oil demand growth forecast.

Tensions remain high over the fighting in Gaza as Israeli forces continue to push south against Hamas, while the U.S. launched several strikes this week against Houthi missiles used to hit ships in the Red Sea.

But oil prices have remained in a tight trading range YTD, as the major players in the conflict are responding “in a measured way that does not seek heavy escalation,” according to analysts at Macquarie.

Most of the Red Sea attacks have included a single or small number of projectiles, have been “highly calibrated,” and caused minimal damage, and U.S.-led responses have been “equally calibrated,” Macquarie said.

Front-month Nymex crude (CL1:COM) for February delivery ended the week +1% to $73.41, despite dropping 0.9% on Friday, while front-month March Brent crude (CO1:COM) closed the week +0.3% to $78.56/bbl, after sliding 0.7% on Friday.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)

The Department of Energy said Friday it bought 3.2M barrels of oil for the Strategic Petroleum Reserve, as it continues to slowly rebuild inventories after selling a record amount following Russia’s invasion of Ukraine in 2022.

The DoE said Exxon Mobil (XOM) will sell the government 1.4M barrels, BP (BP) and Macquarie will each provide 600K barrels, while Phillips 66 (PSX) and Sunoco (SUN) will each sell 300K barrels.

The department said it paid an average price of $75.96/bbl, or a total of $243M, for the crude, compared to the average $95/bbl it sold SPR crude in 2022; since it began buying oil to replenish the reserve last year, it has acquired ~17M barrels at a $75.75/bbl average.

Energy (NYSEARCA:XLE) ranked second from the bottom among stock market sectors this week, finishing -3%.

Top 5 gainers in energy and natural resources during the past 5 days: Uranium Royalty (UROY) +33.4%, Enerflex (EFXT) +14.4%, Overseas Shipholding (OSG) +12.6%, Uranium Energy (UEC) +11.7%, Alpha Metallurgical Resources (AMR) +11%.

Top 10 decliners in energy and natural resources during the past 5 days: Plug Power (PLUG) -27.9%, American Battery Technology (ABAT) -27.9%, Piedmont Lithium (PLL) -22.1%, Aemetis (AMTX) -21.9%, Stem (STEM) -20.8%, Lithium Americas – Argentina (LAAC) -18.1%, Fortuna Silver Mines (FSM) -16.8%, Genie Energy (GNE) -16.3%, Arcadium Lithium (ALTM) -16%, Lithium Americas (LAC) -15.7%.

Source: Barchart.com