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Futures Movers: Oil ends higher on China demand hopes, while natural gas tumbles 11%

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Oil futures finished higher Monday, finding support as investors assessed the longer-term outlook for Chinese demand as the country relaxes its COVID-19 curbs.

Natural-gas futures, meanwhile, fell sharply on forecasts for moderating temperatures across much of the U.S.

Price action

West Texas Intermediate crude for January delivery
CL.1,
+1.99%

 
CL00,
+2.21%

 
CLF23,
+1.99%

rose 90 cents, or 1.2%, to end at $75.19 a barrel on the New York Mercantile Exchange.

February Brent crude
BRN00,
+0.64%

 
BRNG23,
+0.64%
,
the global benchmark, gained 76 cents, or 1%, to settle at $79.80 a barrel on ICE Futures Europe.

Back on Nymex, January gasoline
RBF23,
+2.41%

rose 2.1% to $2.1776 a gallon, while January heating oil
HOF23,
-1.07%

shed 2.1%, finishing at $3.0535 a gallon.

January natural-gas futures
NGF23,
-11.71%

dropped 11.4% to end at $5.851 per million British thermal units.

Market drivers

Crude was back on higher ground Monday. Prices rose last week, but fell significantly on Friday after rate rises by major central banks and indications that rates will remain elevated in 2023 stoked fears of a global economic downturn, analysts said.

“There is no doubt that demand is being adversely influenced, and this is mainly because traders do not like the fact that central banks are dealing with their monetary policy. However, not everything is so negative as China has vowed to fight all pessimism about its economy, and it will do what it takes to boost economic growth,” said Naeem Aslam, chief market analyst at Ava Trade, in a note.

China’s strict COVID policies have undercut demand for crude from one of the world’s largest energy-consuming countries. The relaxation of COVID restrictions is seen as a long-term positive, but a wave of infections has sparked concerns about the near-term outlook.

“Going forward, it seems more likely that we will see further support from the PBOC (People’s Bank of China) to support economic growth in China, and Beijing is likely to ease off all the policies around COVID,” he wrote, bringing more stability to oil prices, Aslam said in a note.

“Natural-gas futures are crashing lower today amid bearish shifts in weather conditions and continued strong production numbers that have helped improve storage levels,” said Victoria Dircksen, commodity analyst at Schneider Electric, in a note.

“As the latest wave of colder-than-normal weather migrates to the East and South, NOAA’s near-term weather forecasts predict warmer-than-average temperatures spreading from the West to the Midwest,” she wrote. “More importantly, the colder temperatures that will soon arrive across the eastern U.S. are seen fading heading into the new year, bringing strong storage levels back in focus.”

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