Oil spot price: US cold weather triggers price jump

on Jan 27, 2014
Updated: Oct 21, 2019

_iNVEZZ.com: Monday, January 27th:_

**Crude oil**
West Texas Intermediate (WTI) crude has today fallen below $97 a barrel but still holds on to last week’s gains – the most intraweek so far this year – as freezing temperatures in the US increase heating oil demand.
The spot price of WTI last week rose 2.4 percent and heating oil is currently trading around its highest level in five months.

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Astmax Asset Management senior fund manager Tetsu Emori says that the resumption of sub-zero temperatures is “driving heating oil and natural gas prices, and that’s driving the WTI price”. Emori notes that “demand for middle distillates is quite good, and inventories are getting smaller”.
Brent crude initially today fell to $107.42 but then found support at the 89-hour simple moving average, to be currently trading up at $107.75.

Mitsubishi Corporation oil risk manager Tony Nunan writes that “overall, the fundamental scenario for oil is not so bad because you have recovery in the United States and Europe possibly making up for the slowdown in China”. He poses the question though: “But will we have to go through another crisis of a contagion across emerging markets?”, an issue on “everybody’s mind now”.

Nunan says that “the government is doing the right thing, but China is a bit of a double-edged sword”, adding that the two risks are for “creating a bubble” and “a slowdown”.
According to a Reuters report, China’s economic growth will slow gradually over the next 24 months and the projected rate of 7.4 percent this year will be the slowest expansion for the economy since 1990.

The US Federal Reserve is expected to cut its bond-buying programme by another $10 billion at the two-day monetary policy meeting starting tomorrow.

Phillip Futures analysts write in a note that “if further tapering were to occur, the US-denominated crude is likely to suffer in the short-term due to the strengthening in the greenback”. They think that in the longer term “prospects will be positive as [tapering] underpins recovery in the US economy, suggesting higher demand for” crude oil.
**Natural gas**
Following gains over the past four trading days, natural gas initially today rose further to reach its highest point in almost four years, at $5.43 per 1,000 cubic feet, as a renewed bout of freezing weather in the United States boosted demand for the commodity.
The natural gas spot price is being driven up by a January on course to be the coldest month so far this century in the lower 48 of the contiguous states, according to Commodity Weather Group. Used to warm 49 percent of US households, natural gas inventories have dropped at a record pace during the current winter, government data from last week shows.


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