By Myra P. Saefong and William Watts
Natural gas futures rise due to the evolution of the climate in the Atlantic
Oil futures on Tuesday posted back-to-back gains to settle at their highest level in seven weeks, boosted by upbeat outlook for global crude oil demand.
Meanwhile, natural gas futures rose as warmer weather boosted demand potential and evolving weather in the Atlantic renewed concerns about production in the Gulf of Mexico.
Price movements
West Texas Intermediate crude oil for July delivery CL.1 CLN24 rose $1.24, or 1.5%, to settle at $81.57 a barrel on the New York Mercantile Exchange. The contract expires at the end of the trading session on Thursday. August Brent crude BRN00 BRNQ24 rose $1.08, or 1.3%, to $85.33 a barrel on ICE Futures Europe. Brent and WTI prices based on the first months were at their highest level since April 30, according to Dow Jones Market Data. July RBN24 gasoline rose 1.5% to $2.48 a gallon, while July HON24 heating oil added 1.5% to $2.52 a gallon. Natural gas for July delivery NGN24 settled at $2.91 per million British thermal units, up 4.3%.
Market indicators
Oil has recovered from its early June pullback to test seven-week highs thanks to "price-supportive rhetoric" from the Organization of the Petroleum Exporting Countries and its allies, said Tyler Richey, co-editor of Sevens Report Research. .
The initial "knee-jerk selling" reaction to OPEC+'s June 2 decision to phase out voluntary oil production cuts after the third quarter was "largely reversed and seen as overblown," Richey told MarketWatch. OPEC+ leaders "confirmed that they will remain flexible and will only reduce their voluntary production cuts if market conditions justify it, and clarified that increasing production is not necessarily a basic expectation at this time," he said.
"Evidence of strong domestic demand at the start of the US summer driving season, rising geopolitical tensions abroad and renewed hopes for a perfectly executed management [economic] The Federal Reserve's "soft landings" have also contributed to the rally in oil prices, Richey said.
Read: Fed's Kugler eyes interest rate cut this year, says economy 'moving in the right direction'
Geopolitics "returned as a significant influence on markets in recent weeks, as there has been a resurgence of attacks on ships in the Red Sea related to the ongoing conflict between Israel, Hamas and Hezbollah," Richey said. Ukrainian drone attacks on Russian oil and energy infrastructure resumed this week, with an attack on a refined products terminal in Azov causing an explosion and a significant fire at the facility, she said.
However, sentiment in the oil market is "fragile," Richey said. "If we see any headlines that contradict any of the factors that have supported the latest rally, or even just an uptick in overall market volatility towards the end of the quarter, we could see oil markets correct back toward the mid-range of 70 dollars a barrel."
Uncertainty around the outlook for crude demand, particularly from China, could cause traders to pause following the rally, analysts have said.
Output at Chinese oil refineries fell 1.8% year-on-year in May, Reuters reported on Monday, citing data from the country's statistics office.
Crude oil processing was hit in May by regular maintenance work at state-owned and larger private refineries, while small independent refiners increased their processing somewhat due to a slight improvement in margins, said analyst Carsten Fritsch. of Commerzbank raw materials, citing data from consultants. Capacity utilization remained well below the level of a year ago, with no signs of improvement so far this month, he said.
"Crude oil processing in China could therefore stagnate this year for the first time in two decades, with the exception of 2022, which was affected by coronavirus lockdowns," Fritsch wrote. "As a result of this, crude oil processing increased to a record level last year. Therefore, China's drive for global oil demand will likely be significantly lower this year."
In the United States, energy traders will be watching developments in the weather in the Gulf of Mexico and the Atlantic, said Phil Flynn, senior market analyst at Price Futures Group.
The National Hurricane Center has issued marine warnings for the Gulf of Mexico and advisories for the Atlantic about a possible tropical cyclone, renewing concerns about possible disruptions to energy production and demand during the extended Atlantic hurricane season. until November 30.
Meanwhile, weekly U.S. oil supply data from the Energy Information Administration will be released Thursday at 11 a.m. ET, a day later than usual due to the holiday on Wednesday, June 16. . Weekly EIA data on stored natural gas supply will be released Friday at 7:30 a.m.
On average, analysts expect the EIA to report a crude supply decline of 4.1 million barrels for the week ending June 14, according to a survey by S&P Global Commodity Insights. They also predict increases in the supply of 100,000 barrels of gasoline and 280,000 barrels of distillates.
-Myra P. Saefong -William Watts
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06-18-24 1514ET
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