Oil futures ended lower on Thursday, with the U.S. benchmark edging down from a nearly five-month high as investors assessed the economic outlook and prospects for crude demand.
A monthly assessment of the outlook for supply and demand from the Organization of the Petroleum Exporting Countries drew little reaction. Still, oil import data from China were encouraging in terms of demand prospects, analysts said.
Price action
-
West Texas Intermediate crude for May delivery
CL.1,
+0.05%CL00,
+0.05%CLK23,
+0.05%
fell $1.10, or 1.3%, to settle at $82.16 a barrel on the New York Mercantile Exchange. The U.S. benchmark ended Wednesday at its highest since Nov. 16. -
June Brent crude
BRN00,
+0.07%BRNM23,
+0.07%,
the global benchmark, lost $1.24, or 1.4%, at $86.09 a barrel on ICE Futures Europe. -
Back on Nymex, May gasoline
RBK23,
-0.19%
fell 1.4% to $2.83 a gallon, while May heating oil
HOK23,
+0.21%
settled at $2.67 a gallon, down 1.1%. -
May natural gas
NGK23,
+2.51%
lost 4.1% to $2.01 per million British thermal units.
Market drivers
Crude prices consolidated after seeing gains the previous session in the wake of a U.S. consumer-price index reading that showed inflation cooled somewhat in March, easing fears around the scope of future Federal Reserve interest-rate increases.
On Wednesday, data revealed that U.S. wholesale prices declined by 0.5% in March, the biggest fall in almost three years.
What was interesting about Wednesday’s rally was that the U.S. petroleum inventory data, which were largely bearish, were “ignored and traders instead bid up the market on the easing headline CPI figure,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.
“To me, that suggests the market has largely priced in the OPEC+ production cut planned for next month and is again focused on the demand outlook, as the cooling price pressures bolstered hopes a hard economic landing can be avoided,” he said.
“This could become a bit of a Catch 22 for markets as rising oil prices will add upward pressure to headline inflation…which would reignite worries of a [Federal Reserve] that is forced to maintain an aggressive policy stance and ultimately trip the economy into a likely deep and painful recession,” Richey said.
Data Thursday also reportedly showed that China’s crude imports jumped by 22.5% in March.
“The expectation that consumer demand will firm markedly in China as the economy continues to recover from the impact of strict economic lockdowns is another supporting factor for oil markets this week,” said Richey.
On Wednesday, U.S. Energy Secretary Jennifer Granholm reportedly said the Biden administration plans to refill the nation’s Strategic Petroleum Reserve soon, which has also provided recent support for oil prices.
Crude futures saw little reaction early Thursday to a monthly report from OPEC, which left its forecast for growth in world oil demand this year unchanged at 2.3 million barrels a day (mb/d), for an average of 101.9 mb/d.
The cartel warned the outlook “is subject to many uncertainties, including the trend and pace of economic activity in both OECD and non-OECD countries.” The Organization for Economic Cooperation and Development is made up of wealthy countries.
Also see: Global oil production growth will soon ‘shift’ away from OPEC, says EIA
On Nymex, natural-gas futures finished lower after the Energy Information Administration reported on Thursday that domestic natural-gas supplies rose by 25 billion cubic feet for the week ending March 31.
Market expectations called for a storage increase of around 20 billion cubic feet, said Victoria Dircksen, commodity analyst at Schneider Electric.
The data revealed the first weekly natural-gas supply increase of the year so far, according to data from the EIA.
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