Prices Of Oil Climb For A Second Session, Holding Steady At A 2-Week High

On Tuesday, oil futures stayed at their highest levels in two weeks, with experts attributing the surge to increased Chinese energy demand, easing fears about the banking crisis, and rumours of a short-term oil supply interruption.

Price movement

On the New York Mercantile Exchange, West Texas Intermediate crude for May delivery CL00, 1.37% CL.1, 1.36% CLK23, 1.36% climbed 25 cents, or 0.3%, to $73.06 per barrel. Prices reached $73.52, the highest intraday level since March 14, according to FactSet data.

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The global benchmark, May Brent crude BRN00, 1.05% BRNK23, 1.23%, was trading at $78.29 a barrel on ICE Futures Europe, up 17 cents, or 0.2%.

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On Nymex, April gasoline RBJ23, 1.33% up 0.4% to $2.6951 per gallon, while April heating oil HOJ23, 1.00% increased 0.5% to $2.7849 per gallon.

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The April natural gas contract NGJ23, -0.48% declined 0.4% to $2.08 per million British thermal units before expiration at the end of Wednesday's trading session.

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Market Drivers

Analysts say crude oil prices have risen as banking-sector worries have subsided, helping to enhance the prospects for economic growth and, by extension, oil consumption.

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According to Robbie Fraser, manager, of global research & analytics at Schneider Electric, a recent internationjudgmentent has resulted in at least a temporary stoppage of Kurdish oil shipments through Turkey and the Ceyhan pipeline network. According to him, this affects around 400,000 barrels per day or 0.4% to 0.5% of world supplies.

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"The court established that Iraq's semi-autonomous Kurdish area could not export petroleum directly," Fraser explained. "But, most do so with Baghdad's consent and under the authority of the Iraqi central government."

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Oil prices were on course for a second straight session increase on Tuesday, although they remain significantly lower month to date.

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According to Phil Flynn, senior market analyst at The Price Futures Group, the oil sell-off was "based on more concern of contagion in the financial sector than any true supply or demand fundamentals with oil."

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"The market was attempting to comprehend precisely how awful the failure of Silicon Valley bank and the sale of Credit Suisse UBS would have on the broader market," according to Flynn, but this "may turn out to be more optimistic for the market." "The reason for this is that the recent financial fissures will push global central banks to decrease their rate of interest rate hikes — which should allow oil demand to continue unabated."

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Nevertheless, signals of a "China demand boom," as characterized by Stephen Innes, managing partner at SPI Asset Management, have contributed to boosting oil prices recently.

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Natural-gas futures traded mainly down on the New York Mercantile Exchange, following a roughly 6% decline on Monday, which analysts ascribed to demand expectations as predictions call for more spring-like weather in areas of the United States.

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The front-month April contract, which closed Monday at its lowest level in almost a month, is slated to expire on Wednesday. Now, the May contract NGK23, -1.26% is trading higher than the April contract.

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If natural gas can just hang on until after Wednesday's expiry, the rollover to the new contract might "keep natural gas from going over" the $2.00 "cliff," said Robert Yawger, director of energy futures at Mizuho Securities USA, in a daily note.

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