• Natural-gas prices move up after EIA’s weekly U.S. supply report

Myra Saefong and Williams Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNety.com 08 24 2022

Oil futures traded modestly lower on Thursday, with U.S. benchmark prices holding ground at their lowest in about a monts.

Traders looked to news reports that the U.S. may ease sanctions on oil from Venezuela, as global economic worries continued to weigh on the outlook for energy demand.

Price action

• West Texas Intermediate crude for October delivery CL00, -0.37% CLV23, -0.39% was down 21 cents, or 0.3%, at $78.68 a barrel on the New York Mercantile Exchange. On Wednesday, prices settled at the lowest for a front-month contract since July 26.
  
  
• October Brent crude BRN00, -0.38% BRNV23, -0.36%, the global benchmark, declined by 31 cents, or 0.4%, to $82.90 a barrel on ICE Futures Europe. It ended Wednesday at its lowest since Aug. 2.
  
  
• September gasoline RBU23, -0.30% shed 0.4% to $2.7572 a gallon.
  
  
• September heating oil HOU23, 0.30% traded at $3.1446 a gallon, down 0.2%.
  
  
• September natural gas NGU23, 1.44% added 1.4% to $2.531 per million British thermal units.

Market drivers

U.S. officials were drafting a proposal that would ease sanctions on Venezuela’s oil exports if the country moves toward a free and fair presidential election, Reuters reported Wednesday afternoon.

The hope is that easing oil sanctions on Venezuela will make it better able to export a “coveted heavy blend of dirty oil that is so good in yielding diesel,” said Phil Flynn, senior market analyst at The Price Futures Group, adding that diesel is globally undersupplied.

“Something better work when it comes to diesel supply as we head into winter,” he said in Thursday’s daily report.

U.S. supply of distillates, which include diesel, in the weekly Energy Information Administration report released Wednesday was up by 900,000 million barrels last week. However, Flynn pointed out that’s still 16% below the five-year average for this time of year, and there is some doubt over whether Venezuela can raise production fast enough to make a big difference even if sanctions are lifted, he said.

Overall, oil prices have seen a summer rally, trading higher for the quarter to date. The rise was fueled by growing confidence in the global economic outlook and OPEC+ supply cuts, particularly Saudi Arabia’s 1 million barrel-a-day reduction in output that began in July and is set to run through at least the end of September, but crude prices pulled back in August.

More recent weakness has been tied to worries over China’s economic outlook, amplified by troubles in the country’s property sector. A round of weak purchasing managers index readings on Wednesday from Japan to the eurozone to the U.S. added to economic jitters, analysts said.

The physical market, meanwhile, remains tight, indicating strong demand remains in place, said Michael Tran, global energy strategist at RBC Capital Markets, in a note.

Global refinery runs have been running higher by around 2.2 million barrels a day year over year, he said, while refined product inventories have struggled to build in major regions, including China, the U.S. and Europe — indicating demand is likely stronger than previously anticipated, he wrote, which is being reflected by regional crack spreads. A crack spread is the difference between the price of a barrel of crude oil and the products that can be refined from it.

RBC expects crude pricing to consolidate in a tighter band than seen earlier this year, centered around $80 a barrel for WTI ” until an emerging catalyst can shock prices out of this range,” he said. “Our bias is higher from here given that product demand is dictating the complex and has shown few signs of slowing.”

Meanwhile, natural-gas prices turned higher after the U.S. Energy Information Administration reported Thursday that U.S. natural-gas supplies in storage rose by 18 billion cubic feet for the week ended Aug. 18. That was below the average increase of 29 billion cubic feet forecast by analysts surveyed by S&P Global Commodity Insights.

marketwatch.com 08 24 2023 (10:48 a.m. ET)