t
Mayra P. Saefong, William Watts, MarketWatch
SAN FRANCISCO/NEW YORK
EnergiesNet.com 07 26 2022
Oil futures ended lower on Tuesday as worries about a recession dulled demand expectations, while U.S. natural-gas prices notched their highest finish in seven weeks after Russia said it will cut supplies to Europe.
Price action
- West Texas Intermediate crude for September delivery CL00, -1.20% CL.1, -1.20% CLU22, -1.20% fell $1.72, or 1.8%, to settle at $94.98 a barrel on the New York Mercantile Exchange after trading as high as $99.
- September Brent crude BRNU22, 0.28%, the global benchmark, lost 75 cents, or 0.7%, at $104.40 a barrel on ICE Futures Europe. October Brent BRNV22, 0.29% BRN00, 0.29%, the most actively traded contract, lost 73 cents, or 0.7%, to $99.46 a barrel.
- Back on Nymex, August gasoline RBQ22, -0.37% fell 0.8% to $3.355 a gallon.
- August heating oil HOQ22, 1.87% gained 1.9% to $3.5839 a gallon.
- August natural gas NGQ22, 2.04% rose nearly 3.1% at $8.993 per million British thermal units after trading as high as $9.752. The front month marked its highest settlement since June 7, according to Dow Jones Market Data. The September NGU22, 1.60% contract rose 3% to $8.825 per million Btus.
Market drivers
The oil market market continues to show “significant downside risk and fear of recession,” said Robbie Fraser, manager, global research & analytics at Schneider Electric.
That sentiment was clear in the latest International Monetary Fund global economic forecasts, which showed a strong downward revision to expected global GDP growth vs. April projections, he said in a daily market update.
Read: The global economy may soon be teetering on the edge of a recession, IMF says
Meanwhile, the latest U.S. consumer confidence reading backed “downbeat economic data trends,” Tyler Richey, co-editor of Sevens Report Research, told MarketWatch. The index of consumer confidence fell to 95.7 in July from a revised 98.4 in the prior month, the Conference Board said Tuesday.
The data “notably missed estimates and that is adding to already elevated worries about the health of the economy and future demand,” said Richey.
The “supply side headline about an additional 20 million barrels of oil being made available from the [Strategic Petroleum Reserve] between September and October was also a bearish catalyst for oil, he said, adding that the planned SPR releases have been “largely on schedule in recent months.”
And the risk-off money flows in equity markets ahead of the Federal Reserve decision on interest rates “certainly aren’t helping oil either,” said Richey.
The Fed is expected to announced another 75 basis point rise in its benchmark interest rate on Wednesday. Concerns that aggressive monetary tightening by the Fed and other central banks could tip the economy into recession or spark a sharp slowdown have weighed on crude oil prices in recent weeks, analysts said.
Read: Four things you will want to listen for at Wednesday’s Federal Reserve meeting
Traders also await Wednesday’s weekly U.S. petroleum supply data from the Energy Information Administration. On average, analysts expect an 800,000-barrel fall in domestic crude inventories for the week ended July 22, along with supply declines of 1.1 million barrels for gasoline and 200,000 barrels for distillates, according to a survey conducted by S&P Global Commodity Insights.
Natural gas gains
Russian energy giant Gazprom said it would cut natural-gas flows to Germany through the Nord Stream 1 pipeline to 20% of capacity or 33 million cubic feet per day, according to news reports, half its current level.
See also: European countries agree to ration gas amid Russian supply fears
“Concerns over the supply of Russian gas to Europe are having a collateral impact on oil prices, as a potential squeeze on gas supplied to Europe is likely to increase demand for oil and other related fuels such as diesel,” said Ricardo Evangelista, senior analyst at ActivTrades, in a note.
“As anxiety grows in Europe over gas supplies, many now contemplate the possibility of Russia completely turning off the tap, leading to a switch from gas to oil, diesel and other related fuels, in a dynamic that is likely to see further rises in the price of the barrel,” he said.
Front-month natural-gas futures traded nearly 66% higher this month, on track for the biggest monthly percentage gain on record, according to Dow Jones Market Data, citing numbers from FactSet. The day’s front-month intraday high of $9.752 is also the highest intraday value since July 2008.
marketwatch.com 207 26 2022
