Oil futures ended lower Tuesday, failing to hold modest, early gains scored after China delivered an interest-rate cut amid concerns over the demand picture from the world’s second-largest crude importer.
U.S. traders were returning from a three-day weekend after markets were closed Monday for the Junteenth holiday.
Price action
-
West Texas Intermediate crude for July delivery
CL.1,
-0.23% CLN23
fell $1.28, or 1.8%, to close at $70.50 a barrel on the New York Mercantile Exchange. The July contract expired on Monday. August WTI
CL00,
-0.23% CLQ23,
-0.23% ,
the most actively traded contract and new front month, $1.55, or 2.2%, at $70.38 a barrel. WTI futures didn’t settle Monday due to the holiday. -
August Brent crude
BRN00,
-0.27% BRNQ23,
-0.27% ,
the global benchmark, declined 19 cents, or 0.3%, to settle at $75.90 a barrel on ICE Futures Europe. -
Back on Nymex, July gasoline
RBN23,
-0.89%
fell 2.7% to end at $2.609 a gallon, while July heating oil
HON23,
+0.11%
dropped 3% to $2.475 a gallon. -
July natural gas
NGN23,
lost 5.3% to $2.492 per million British thermal units.
Market drivers
The People’s Bank of China on Tuesday cut both its short- and long-term benchmark lending rates by 10 basis points Tuesday, in an effort to support the nation’s slowing economic recovery. The move came after the PBOC last week reduced two key policy rates by 10 basis points each.
Crude prices rose last week, following back-to-back weekly declines, after finding support in Thursday’s session when The Wall Street Journal reported that Chinese authorities were preparing a range of aggressive economic stimulus measures.
Disappointment in China’s economic recovery after the lifting of COVID curbs has dogged the oil market in 2023, with WTI and Brent both down more than 20% for the year to date. Skeptics question whether the efforts Tuesday will provide a meaningful lift.
“Oil prices are a bit rangy to start the week and seemingly moved into short-term Tug of War mode as China’s economic headwinds clash with increased PBOC policy support,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
“But before confidently pushing the oil market higher from here, you would ideally like to see a convincing fall in U.S. storage this week,” he wrote.
Analysts said concerns around Iranian supply also weighed on the market. Reuters, citing industry data, reported that Iranian crude exports topped 1.5 million barrels a day in May, the highest monthly figure since 2018 when they ran near 2.5 million barrels a day before the U.S. withdrawal from a nuclear deal.
Reports of talks between the Biden administration and Iran aimed at achieving an interim nuclear pact weighed down crude last week.
Commodities Corner: Talk of an interim U.S.-Iran nuclear deal is just ‘noise’, but has potential to ‘upset the oil applecart’
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