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Futures Movers: U.S. oil benchmark ekes out win as supply worries remain in focus

The U.S. oil benchmark eked out a gain in choppy trade Thursday, as the commodity market tries to find its footing amid a supply and demand tug of war.

Price action

West Texas Intermediate crude for June delivery
CL00,
+0.97%

CLM22,
+0.97%

CL.1,
+0.97%

rose 42 cents, or 0.4%, to close at $106.13 a barrel on the New York Mercantile Exchange.

July Brent crude 
BRN00,
+0.57%

BRNN22,
+0.57%
,
the global benchmark, fell 6 cents, or 0.1%, to settle at $107.45 a barrel on ICE Futures Europe.

June natural gas 
NGM22,
+0.85%

rose 1.3% to finish at $7.739 per million British thermal units, after closing up 3.5% the prior session.

June gasoline 
RBM22,
+3.15%

rose 2.9% to end at $3.7917 a gallon. June heating oil
HOM22,
-0.53%

fell 0.9% to $3.9161 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 U.S. consumer price inflation to 8.3% in April.

Oil maintained its strength after the Energy Information Administration said U.S. 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.

Pressure on 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 U.A.E. 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. 

The Energy Information Administration reported a 76 billion-cubic-foot injection of natural gas into storage last week. Analysts surveyed by S&P Global Commodity Insights had forecast a 74 billion-cubic-foot injection.

In Europe, gas prices surged 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. U.K. natural-gas prices contract 
GWM00,
-8.29%

surged 37% to $191 pence a therm.

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