Natural-gas futures jumped by nearly 8% on Tuesday, with forecasts for colder weather in much of the U.S. lifting prices to their highest finish in roughly four weeks.
Oil futures, meanwhile, settled flat as traders weighed worries about the coronavirus and its impact on energy demand, along with a forecast for a slowdown in U.S. shale oil output.
The move for natural gas appears to be “a reaction to a much colder forecast for the western half of the country through next week, even though the key Midwest and Northeast consuming regions are forecast above average,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch. “Thus, the gains could prove precarious.”
March natural gas climbed by 14.4 cents, or 7.8%, to settle at $1.981 per million British thermal units on the New York Mercantile Exchange. That was the highest finish for the front-month contract since Jan. 17 of this year, and biggest one-day percentage rise since Jan. 14, 2019, according to Dow Jones Market Data.
Tuesdays’ move marked a bounce back for the commodity, which suffered a loss of 1.1% last week, and touched its lowest levels since March 2016.
Despite the day’s sharp climb in natural gas, Christin Redmond, commodity analyst at Schneider Electric, said in a daily note that “technical indicators predict that it will be very difficult for [natural-gas] prices to break back above key resistance of $2.00 [per million Btus], especially as the bears still maintain control of trend.”
Meanwhile, growing doubts that the Organization of the Petroleum Exporting Countries and its allies, including Russia, will reduce output further to stabilize prices resulted in prices slipping for much of Tuesday’s trading session.
However, U.S. benchmark crude oil prices finished unchanged following the “reported slowdown in shale output growth [and] a reported strike near Tripoli that caused the evacuation of all fuel vessels in port,” said Steeves.
“Otherwise, the coronavirus remains the main theme of the market with daily perceptions of the degree of demand destruction changing, leading to a broadly sideways trading range,” Steeves said.
Crude-oil production from seven major U.S. shale plays is forecast to climb by 18,000 barrels a day in March to 9.175 million barrels a day, according to a report from the Energy Information Administration released Tuesday. Oil output from the Permian Basin is expected to see an increase but shale output from the Anadarko, Appalachia, Bakken and Niobrara regions, is expected to see monthly declines, the report showed.
West Texas Intermediate crude for March delivery settled unchanged at $52.05 a barrel on Nymex, after touching a low of $50.88, while April Brent crude edge up 8 cents, or 0.1%, to $57.75 a barrel on ICE Futures Europe. Both grades of crude oil last week booked their first weekly gains in six weeks.
Crude oil traders have been waiting for signs that members of OPEC and other major producers like Russia — a group known as OPEC+ — will move forward a planned March meeting to sometime this month. However, Reuters, citing unnamed sources , reported that there are no indications that such a gathering will take place, heightening fears that the there isn’t sufficient will to dial back production further, even though an advisory panel recommended output be cut by a further 600,000 barrels per day.
Russia, one of the largest exporters of crude, has been reluctant to reduce oil output further. OPEC+, is currently under an agreement to cut oil output by 1.7 million barrels per day, which expires at the end of March.
The slump in oil prices comes as the outbreak of COVID-19, the infection that originated in Wuhan, China last year, has sickened more than 72,000 people and killed more than 1,800, according to the most recent data out of China.
Commodity investors are concerned about the spread of the disease because it is expected to harm demand from China, the biggest importer of crude in the world. Infections elsewhere in the world could also harm global uptake of fossil fuels, producing a drag on prices.
Indeed, the International Energy Agency cut its 2020 oil demand-growth forecasts by 365,000 barrels a day , a reduction of 30% to its previous forecast made in January, citing the impact of the outbreak of the novel coronavirus.
In other energy trading, March gasoline tacked on 2% to $1.6148 a gallon, after gaining 3.9% for the week, while March heating oil lost 1.5% to $1.6724 a gallon, following a 3.3% advance last week.