Myra P. Saefong and Williams Watts, Market Watch
SAN FRANCISCO/NEW YORK
EnergiesNet.com 08 31 2022
Oil futures settled lower Wednesday amid worries about the global economic outlook, as central banks move to squelch inflation, contributing to a monthly loss of more than 7% for U.S. benchmark crude prices.
Slower economic growth is expected in Europe, China and the U.S. as economies recover from the disruptions caused by the coronavirus pandemic and central banks raise interest rates to combat inflation.
Data showing a third-weekly decline in U.S. crude inventories helped oil briefly pare some of its price losses Wednesday.
Price action
- West Texas Intermediate crude for October delivery CL.1, -1.46% CL00, -1.46% CLV22, -1.44% fell $2.09, or 2.3%, to settle at $89.55 a barrel on the New York Mercantile Exchange, the lowest front month finish since Aug. 17, according to Dow Jones Market Data. Prices lost 9.2% for the month.
- October Brent crude BRNV22, the global benchmark, declined by $2.82, or 2.8%, at $96.49 a barrel on ICE Futures Europe. The contract, which expired at the end of the trading session, fell more than 12% for the month. The most actively traded November contract BRN00, -1.46% BRNX22, -1.46% declined $2.20, or nearly 2.3%, to $95.64. Both WTI and Brent slid more than 5% on Tuesday.
- Back on Nymex, September gasoline RBU22, -4.68% declined by 3.3% to settle at $2.6059 a gallon, down over 25% for the month.
- September heating oil HOU22, -3.00% lost 2.7% at $3.7154 a gallon, but up 2.5% for the month. Both contracts expired at the end of the session.
- October natural gas NGV22, -0.90% gained 0.9% at $9.127 per million British thermal units, with prices marking for a monthly climb of nearly 11%.
Market drivers
“Concern about the economy” is the key reason for oil’s decline, said James Williams, energy economist at WTRG Economics.
“The OPEC part of OPEC+ has expressed concerns about demand and, at times, members are raising the possibility of cutting [production] quotas,” he said. OPEC refers to members of the Organization of the Petroleum Exporting Countries, while OPEC+ is comprised of OPEC and its allies.
“It’s concern about recession that dominates OPEC thinking,” said Williams. OPEC+ meets on Monday.
Read: Oil prices mark their longest monthly losing streak in more than 2 years
Oil prices dived on Tuesday after a Russian news report said OPEC+ weren’t discussing production cuts. Saudi Arabia’s energy minister last week had raised the possibility of reductions.
Meanwhile, the OPEC+ Joint Technical Committee on Wednesday said it sees the oil-market surplus rising by 100,000 barrels a day from its previous estimate to 900,000 barrels a day, Reuters reported. The committee advises OPEC+ on market fundamentals.
“All of yesterday’s news flow was digested as bearish for oil as the threat of OPEC+ cuts were reduced, demand estimates in Europe were adjusted lower on poor data while ‘hot’ data in the U.S. added to already hawkish money flows that bolstered the dollar and further pressured oil,” wrote analysts at Sevens Report Research, in a note.
U.S. benchmark stock indexes moved lower again Wednesday, after falling for a third straight day Tuesday, rattled by Friday’s speech by Federal Reserve Chair Jerome Powell warning that economic pain may lie ahead as the central bank continues to tighten monetary policy in its effort to get inflation under control.
The Sevens Report analysts said they maintained a “neutral view” on WTI, with support at $87 a barrel and resistance between $97 and $100 a barrel “as the outlook for OPEC+ policy has become less certain while global central banks remain committed to getting inflation under control even if it means choking off growth and crippling demand.”
Supply data
The Energy Information Administration on Wednesday reported that U.S. crude inventories fell by 3.3 million barrels for the week ended Aug. 26, down a third week in a row.
On average, analysts expected a decline of 1.9 million barrels, according to a poll conducted by S&P Global Commodity Insights. The American Petroleum Institute late Tuesday said U.S. crude inventories rose by 600,000 barrels last week, according to sources.
The EIA also said gasoline stockpiles fell 1.2 million barrels last week, while distillate stocks edged up by 100,000 barrels. The analyst survey called for an inventory declines of more than 1.3 million barrels for gasoline and nearly 1.2 million barrels for distillates.
Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 500,000 barrels for the week, the EIA said, while stocks in the Strategic Petroleum Reserve fell by 3.1 million barrels.
marketwatch.com 08 31 2022
