Oil prices traded lower on Thursday, reversing some of the previous day’s gains as the commodity market tries to find its footing amid a demand and supply tug of war.
price-action
-
West Texas Intermediate crude for June delivery CL00,
-1.59% CLM22,
-1.59% CL.1,
-1.59%
fell around $1.84, or 1.8%, to $103.78 a barrel. The contract climbed 6% to settle at $105.71 a barrel on the New York Mercantile Exchange on Wednesday. -
July Brent crude BRN00,
-1.73% BRNN22,
-1.73% ,
the global benchmark, fell $1.68, or 1.7%, to $105.83 a barrel. The contract rose 4.9% to finish at $107.51 a barrel on ICE Futures Europe on Wednesday. -
June natural gas NGM22,
-2.07%
fell 2.3% to $7.46 per million British thermal units, after closing up 3.5% the prior session. -
June gasoline RBM22,
+0.81%
fell 0.3% to $3,674 a gallon. June heating oil HOM22,
-2.48%
fell 2.9% to $3,834 a gallon.
market drivers
Wednesday’s gains came amid improvement on China’s COVID front, bullish forecasts for oil by Morgan Stanley, and as the market looked past a stronger-than-expected rise in US consumer price inflation to 8.3% in April.
Oil maintained its strength after the Energy Information Administration said US crude inventories jumped by 8.5 million barrels last week. Analysts surveyed by S&P Global Commodity Insights had, on average, forecast a fall of 1.8 million barrels.
But US and Brent crude have each lost more than 5% this week, as investors are dealing with a range of factors affecting both supply and demand.
Thursday’s slippage in oil prices, “highlights how traders are struggling to price correctly the world’s most important energy contracts as the focus continues to alternate between China’s lockdowns hurting demand and high inflation killing economic growth,” said Saxo Bank’s head of commodity strategy Ole Hansen.
That’s as the EU has yet to agree on sanctions over Russian crude oil, “while Saudi Arabia and UAE have warned that all energy sectors are running out of capacity. Underlying this market looks supported as inventories of fuel such as diesel and gasoline continue to decline,” said Hansen.
Monthly oil reports were released from both the International Energy Agency and OPEC. The IEA warned that tighter sanctions on Russia’s oil exports could set its crude oil output back by nearly two decades.
The Organization of the Petroleum Exporting Countries, meanwhile, cut its forecast for annual world oil demand to 3.4 million barrels a day in 2022, down 300,000 barrels a day from its April forecast.
In Europe, gas prices were emerging partly due to disruption to a Russian pipeline that runs through Ukraine. As well, German Economy Minister Robert Habeck has accused Russian of weaponizing energy, after Moscow late Wednesday reportedly announced sanctions for western energy firms and European gas deliveries fell.
Russia reportedly seized a German unit of Gazprom, which had its deliveries reduced to Germany, though that amounts to just 3% of the country’s imports from Russia, according to Bloomberg. Ukraine’s natural gas pipeline operator on Wednesday stopped Russian shipments through a key hub in the east of the country,
Natural gas on the Dutch-based TTF trading hub surged 20% for the July contract to €115,570 a megawatt. UK natural-gas prices contract GWM00,
surged 37% to $191 pence a therm.
.