William Watts, MarketWatch
NEW YORK
EnergiesNet.com 05 06 2022
Oil futures ended slightly higher Thursday, with the European Union seen moving closer to a ban on imports of Russian crude.
Natural gas jumped, posting its highest finish in more than 13 years.
Price action
- West Texas Intermediate crude for June delivery CL.1, 1.85% CL00, 1.88% CLM22, 1.88% rose 45 cents, or 0.4%, to close at $108.26 a barrel on the New York Mercantile Exchange.
- July Brent crude BRN00, 1.89% BRNN22, 1.88%, the global benchmark, finished with a gain of 76 cents, or 0.7%, at $110.90 a barrel on ICE Futures Europe.
- June natural-gas futures NGM22, 1.61% jumped 4.4% to close $8.783per million British thermal units, its highest finish since Aug. 1, 2008.
- June gasoline RBM22, 0.90% rose 0.2% to $3.6587 a gallon.
- June heating oil HOM22, 0.67% dropped 3.7% to $4.041 a gallon.
Market drivers
Crude added gains seen after the EU on Wednesday laid out a plan that would ban imports of Russian crude within six months, though a surge by the U.S. dollar amid a sharp selloff in stocks capped gains, analysts said.
A stronger dollar can be a headwind for commodities priced in the unit, making them more expensive to users of other currencies.
The timetable for the Russia ban, which must be unanimously approved by all 27 EU members, provides for an orderly change in trade flows, but there are risks, said Warren Patterson, head of commodities strategy at ING, in a note.
“There is the potential for Russia to halt oil flows to the EU before the wind-down period comes to an end, which would leave the EU scrambling to quickly find other supply,” he said. “In addition, there is the risk of secondary sanctions from the U.S. on Russian oil, which would make it difficult for any country to buy Russian oil.”
A tight supply and demand balance, means the market wouldn’t be able to cope with almost a full loss in Russian oil supply, “and so if we were to see this, we would see significantly higher prices,” Patterson said. “For now, we do not think secondary sanctions are likely, so this should allow the likes of India and China to increase their Russian oil purchases, freeing up other sources of supply for the EU.”
The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, agreed Thursday to lift production by 432,000 barrels a day in June. The move was widely expected and in keeping with the group’s plan to continue unwinding production cuts that were put in place in 2020 following the onset of the COVID-19 pandemic.
Read: Why OPEC+ keeps agreeing to oil production increases it can’t meet
Natural-gas futures initially dipped after the Energy Information Administration reported that underground storage saw a net injection of 77 billion cubic feet last week. Analysts surveyed by S&P Global Commodity Insights, on average, had forecast an injection of 61 billion cubic feet.
Storage, however, remains 306 billion cubic feet below its five-year average for this time of year, the EIA said.
“There is no doubt that storage is operating at a strong deficit to last year, and it is also true that the U.S. is trying its absolute best to get as much [liquefied natural gas] to the European Union as fast as possible, with even greater export volumes likely in the future,” said Robert Yawger, executive director for energy futures at Mizuho Securities. “However, today’s price action, buying the dip and rallying the contract to the moon, implies to me that the spec is taking advantage of the situation and jumping into the contract for size.”
marketwatch.com 05 05 2022
