Mayra P. Saefong, William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 06 22 2022

Oil futures finished higher on Tuesday to mark a partial rebound from sharp losses last week, with tight global supplies coming back into focus as U.S. traders returned from a three-day weekend.

U.S. markets were closed Monday for the Juneteenth holiday.

Price action

• West Texas Intermediate crude for July delivery CL.1, -2.03% CLN22, which expired at the end of the session, rose $1.09, or 1%, to settle at $110.65 a barrel on the New York Mercantile Exchange. The most actively traded and now front-month contract, August WTI crude CL00, -2.03% CLQ22, -2.03%, added $1.53, or 1.4%, to settle at $109.52 a barrel. WTI slumped over 9% last week, ending a string of seven straight weekly advances.
  
  
• August Brent crude BRN00, -2.05% BRNQ22, -1.97%, the global benchmark, added 52 cents, or 0.5%, to $114.65 a barrel on ICE Futures Europe.
  
  
• Back on Nymex, July gasoline RBN22, -1.34% rose by less than a penny to $3.7945 a gallon.
  
  
• July heating oil HON22, -1.36% gained 0.4% to $4.3584 a gallon.
  
  
• July natural-gas futures NGN22, -1.78% lost 2% to $6.808 per million British thermal units.

What’s driving the market

“The oil market remains too tight over the short-term and rising expectations over tougher sanctions with Russian crude should keep demand especially strong here,” said Edward Moya, senior market analyst at OANDA, in a Tuesday afternoon note.

Crude traded near three-month highs last week before retreating as interest rate increases by the Federal Reserve and other central banks sparked worries over the potential for a recession and triggered a sharp selloff in equities and other assets.

Equities bounded back Tuesday though, with U.S. stock indexes making sharp gains on Wall Street.

Data on Monday, showing China significantly increased imports of Russian crude in May, were a positive for crude prices after the European Union moved to ban imports of crude from the country by sea as the West continues to tighten sanctions in response to Russia’s invasion of Ukraine.

The data showed China imported a record 2.06 million barrels a day of Russian crude in May, or around 18% of total Chinese oil imports, said Warren Patterson, head of commodities strategy at ING, in a note. That’s up from 1.33 million barrels a day, or 13% of total imports, in May 2021.

“Clearly, the large discounts available on Russian crude oil have been too tempting for Chinese buyers. In theory, the more displaced Russian oil we see going to the likes of China and India, the easier it should be for the global market to deal with the EU’s ban on Russian seaborne crude imports,” Patterson wrote.

Meanwhile, the Indian government asked state oil companies to buy big volumes of cheap oil from Russia, The Wall Street Journal reported Tuesday.

Bearish analysts said signs of rising U.S. crude output, however, could signal more weakness for crude.

Data on Friday showed the number of total U.S. oil rigs rose by 7 last week to 740, while the Biden administration looks to begin refilling strategic reserves in September, “which looks like good news for producers, who can get a steady buyer from the government, potentially keeping the price from an uncontrollable decline.” noted Alex Kuptsikevich, senior market analyst at FxPro.

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“In the coming weeks, we should be prepared for a correction to $100 or even $90 with negative surprises in the global economy and a stock market crash. However, for the rest of this year and most of the next, Brent crude may stay mainly within the $90-120 range,” he wrote.

Weekly data on U.S. petroleum supplies from the Energy Information Administration will be released Thursday, a day later than usual because of Monday’s holiday.

marketwacht.com 06 22 2022