Oil prices up on improving demand prospects

Oil futures went up on Friday as traders focused on improving demand prospects due to China's economic reopening and expectations that the U.S. economy could achieve a soft landing and avoid a recession later this year.

February natural gas NGG 23 shed 0.3% to $2.936 per million British thermal units. The contract, which was due to expire at the settlement, traded more than 7% lower for the week. According to Dow Jones Market Data, it was its lowest since May 25, 2021. The March natural gas NGH 23, the most actively traded contract, added 0.5% to $2.863 per million BTUs.

Market analysts attributed several factors to rising crude-oil prices, including a U.S. economy that is holding up stronger than expected, China reopening after lifting COVID restrictions, and the expectation that the Organization of the Petroleum Exporting Countries and its allies won't boost production.

Stephen Innes, SPI Asset Management's managing partner, said OPEC remains a critical piece of the puzzle. The price cap on Russian oil, and the risk it creates precedents, will limit the willingness to raise production and play ball with the West because of the frustrations with the Western energy policies. The Joint Ministerial Monitoring Committee JMMC, which reviews the oil market and has no ability to make official production policy decisions, will meet on February 1. The next full meeting of the policy-setting OPEC is scheduled for June. Oil agencies expect solid global oil demand growth with a significant contribution from China, and many traders think it could push the market back into deficit from June onwards and drive Brent back up to $105 a barrel by the fourth quarter of this year, said Innes. If the oil market turned out to be softer than most forecasts, OPEC should be able to put a floor under prices because of its strong pricing power, he said. The production of the OPEC could be reduced for a long time after its June 4th meeting or implement further cuts. The front-month natural-gas futures were lower ahead of the end of the trading session. The price of the commodity is around 35% lower year to date.