Oil futures headed higher for a third straight session on Thursday, with U.S. prices looking to end the month of January with a gain of more than 20%, which would be the strongest monthly rise in more than three years.
“It seems all the headlines of late our positive for crude prices,” said Edward Moya, market analyst at Oanda, in a note Thursday. “Oil is stronger after the [U.S. Federal Reserve’s] dovish pivot crushed the dollar, helping commodity prices, OPEC+ production cuts are kicking in, [U.S.] sanctions against Venezuelan’s state-owned oil company PdVSA were announced, and Saudi Arabia has cut exports to the U.S., dropping them to the lowest since October 2017.”
West Texas Intermediate crude for March delivery US:CLG9 was up $1.02, or 1.9%, at $55.25 a barrel on the New York Mercantile Exchange. Based on the front-month contracts, prices logged their highest finish, at $54.23 Wednesday, since Nov. 21, according to FactSet data. Month to date, front-month contracts were up 21%, on pace for the strongest monthly gain since April 2015, according to Dow Jones Market Data.
On its expiration day, March Brent crude LCOH9, +0.41% rose 65 cents, or 1.1%, to $62.30 a barrel on ICE Futures Europe, with prices based on the front-month contracts up nearly 16% for the month.
The upbeat tone for continued a day after weekly U.S. crude supplies were reported up less than expected and amid continued reaction to U.S. sanctions on Venezuela’s state-run oil company, all of which helped to lift U.S. benchmark prices to their highest finish on Wednesday in over two months.
Oil was also benefiting from the upbeat tone for risk assets overall after a dovish interest rate repositioning at the Federal Reserve sent all three U.S. stock benchmarks to their highest levels since at least Dec. 6 and sent the U.S. dollar DXY, +0.17% lower Wednesday. Dollar-denominated commodities like oil tend to have an inverse relationship with the greenback. U.S. stocks were mixed Thursday, with the dollar mostly steady after its post-Fed drop.
The Energy Information Administration reported Wednesday that domestic crude supplies edged up by 900,000 barrels for the week ended Jan. 25. That was smaller than the 3.1 million-barrel rise expected by analysts polled by S&P Global Platts.
“EIA data is also showing that the implied U.S. crude production figure has been heading lower over the last four weeks, with winter weather and potentially even changing production approaches due to lower prices having seen this number falling by almost 400,000 barrels a day on a four-week average basis,” analysts at consulting firm JBC Energy wrote in a note Thursday.
The EIA data Wednesday also showed an unexpected weekly decline in gasoline stockpiles, which fell by 2.2 million barrels last week.
On Nymex, February gasoline RBG9, -1.50% rose 2.1% to $1.412 a gallon, up over 7% for the month, and February heating oil HOG9, -1.05% rose 0.9% to $1.915 a gallon, headed for a monthly rise of 14%. The contracts expire at Thursday’s settlement.
As for Venezuela, the U.S. sanctioned the state-run Petróleos de Venezuela SA, or PdVSA, earlier this week, raising the risk of disruptions to global oil supply from the Organization of the Petroleum Exporting Countries member, which is also home to the world’s largest oil reserves.
Self-proclaimed “interim president” of Venezuela Juan Guaido, who has U.S. backing, is the biggest challenge to strongman Nicolás Maduro’s government in years, as the country strains under an economic crisis and sky-high inflation.
Venezuelan factors play out against the broader OPEC-led production cuts of 1.2 million barrels a day for the first half of the year aimed at rebalancing an oversupplied market. As supply is curbed, the oil market has also been weighing signs of slower global economic growth and the potential for weaker energy consumption especially after the International Monetary Fund last week lowered its economic growth outlook for 2019.
Read: Here’s what Venezuela turmoil means for oil prices
In other energy trading, March natural gas NGH19, -0.91% fell 0.9% to $2.829 per million British thermal units, with the contract looking to end the month with a loss of 0.7%.
The EIA reported Thursday that domestic supplies of natural gas fell by 173 billion cubic feet for the week ended Jan. 25—smaller than the decline of 197 billion expected by analysts polled by S&P Global Platts.
Prices settled Wednesday at $2.854 Wednesday, the lowest since September as factors tied to the extreme cold-weather conditions briefly hitting parts of the U.S. have been generally dismissed by the market.
Read: GM halts production in Michigan amid natural-gas shortage: report
Read: Why prices of a popular heating fuel are falling despite the Midwest’s coldest weather in 20 years
And: Here’s how investors can take advantage of ‘opportunity’ in natural gas
Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.