Oil futures climbed on Thursday, extending on a gain from a day earlier when U.S. government data revealed a nearly 10 million-barrel weekly drop in domestic crude inventories.
Still, tough talk from Federal Reserve Chair Jerome Powell and other global central bank chiefs on Wednesday on the need to keep tightening monetary policy in order to bring down inflation continued to cap gains, analysts said.
Price action
-
West Texas Intermediate crude for August delivery
CL00,
+0.24% CL.1,
+0.24% CLQ23,
+0.24%
rose 70 cents, or 1%, to $70.26 a barrel on the New York Mercantile Exchange. -
August Brent crude
BRNQ23,
+0.24%
rose 66 cents, or 0.9%, to $74.69 a barrel on ICE Futures Europe. Septmber Brent
BRN00,
+0.16% BRNU23,
+0.16% ,
the most actively traded contract, gained 60 cents, or 0.8%, to $74.84 a barrel. -
Back on Nymex, July gasoline
RBN23,
+0.61%
added 0.2% to $2.6074 a gallon, while July heating oil
HON23,
+0.26%
was up 0.9% to $2.4285 a gallon. -
August natural gas
NGQ23,
+2.21%
climbed 2.6% to $2.738 per million British thermal units after the contract 4.3% on Wednesday.
Market drivers
On Wednesday, WTI settled 2.8% higher and Brent rose 2.5% after the Energy Information Administration reported that U.S. commercial crude inventories fell by 9.6 million barrels for the week ended June 23. The EIA report showed weekly inventory gains of 600,000 barrels for gasoline and 100,000 barrels for distillates.
However Powell, participating in a panel discussion at an ECB monetary policy forum in Sintra, Portugal, reiterated Wednesday that a “strong majority” of Fed policy makers expect to deliver two more quarter percentage point interest-rate increases this year. Powell also played down the idea the Fed has shifted to a pattern of delivering rate hikes at every other meeting, saying that he “wouldn’t take moving consecutive meetings off the table at all.”
See: Powell and other central bankers vow to keep fighting inflation until there is evidence of success
Crude prices had difficulty following through with gains early Thursday “on account of hawkish comments from the U.S. Fed as inflationary concerns continue,” said analysts at ING, in a note. Higher interest rates can raise the potential for a recession, which may lead to lower energy demand.
“Oil continues to face upside headwinds in the form of oversupply risks and worries
about economic growth,” analysts at Sevens Report Research wrote in Thursday’s newsletter. If both of those risks fail to materialize, “via a resilient global economy or additional production cuts from Saudi Arabia, then oil can rally throughout the summer, although it’s unclear either (or both) of those events will occur.”
Oil futures looked to end the month on Friday with a gain, but traded lower quarter to date.
Natural-gas futures, meanwhile, looked to recover some of Wednesday’s more than 4% decline after the U.S. Energy Information Administration reported on Thursday a slightly smaller-than-expected weekly rise in U.S. stockpiles.
Domestic natural-gas supplies in storage rose by 76 billion cubic feet for the week ended June 23. Analysts called for a storage increase of 83 billion cubic feet on average, according to a survey conducted by S&P Global Commodity Insights.
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