Oil futures climbed sharply on Thursday after a two-day rout fueled by recession fears that sent the U.S. benchmark below $100 a barrel and into a bear market.
Official U.S. data revealed a hefty weekly rise in domestic crude inventories, but petroleum-product stocks declined.
Natural-gas futures, meanwhile, climbed by more than 10% after U.S. government data revealed a smaller-than-expected weekly rise in domestic supplies of the fuel.
Price action
- West Texas Intermediate crude for August delivery CL.1, +5.86% CL00, +5.86% CLQ22, +5.86% rose $5.37, or 5.5%, to $103.90 a barrel on the New York Mercantile Exchange. The U.S. benchmark on Wednesday ended at $98.53, a bit more than 20% below the recent settlement high of $123.70 set on March 8, meeting a widely used definition of a bear market.
- September Brent crude BRN00, +5.46% BRNU22, +5.46%, the global benchmark, rose $5.02, or 5%, to $105.71 a barrel on ICE Futures Europe.
- Back on Nymex, August gasoline RBQ22, +7.54% rose 7.2% to $3.4709 a gallon, while August heating oil HOQ22, +7.34% traded at $3.6394 a gallon, up 6.7%.
- August natural gas NGQ22, +12.89% rose 12% to $6.159 per million British thermal units, with front-month prices headed for their highest finish in just over a week.
Market drivers
Rising fears of recession were blamed for the fall in crude oil prices which joined the broader commodity complex in giving back a large chunk of the gains seen in 2022 after Russia’s invasion of Ukraine.
“Oil is getting decimated with little new information about production or consumption. Still, with commodity traders turning very risk-averse due to growing demand and still hawkish Fed policy concerns, the recessionary headline risk is like an anvil around the market’s neck,” said Stephen Innes, managing partner at SPI Asset Management, in emailed comments.
Read: Oil selloff overshoots, says Goldman, as U.S. crude extends dive below $100 a barrel
However, analysts note that the oil market remains tight, underlined by the premium for near-term contracts over longer-dated futures — a phenomenon known as backwardation.
Supply data
An unexpected weekly rise in U.S. crude supplies failed to put a damper on the rebound in oil prices Thursday, as data also revealed that petroleum-product stocks declined.
Domestic crude inventories climbed by 8.2 million barrels for the week ended July 1, data from Energy Information Administration on Thursday showed. On average, analysts expected a fall of 1.2 million barrels, according to a poll conducted by S&P Global Commodity Insights. Data were delayed by a day due to Monday’s Independence Day holiday.
The American Petroleum Institute reported late Wednesday that U.S. crude supplies rose by 3.8 million barrels last week, according to sources.
The EIA report also showed supply declines of 2.5 million barrels for gasoline and 1.3 million barrels for distillates. The analyst survey called for an inventory decline of 500,000 barrels for gasoline and an increase of 1 million barrels for distillates.
“A pop in crude imports and a dip in exports have combined with lower refinery runs to yield a chunky build to crude inventories in this week’s EIA report — also aided by another large transfer of 5.9 million barrels from the SPR,” said Matt Smith, lead oil analyst, Americas, at Kpler.
Oil stocks in the Strategic Petroleum Reserve fell to 492 million barrels, from 497.9 million barrels from the week before, EIA data showed. Crude stocks at the Cushing, Okla., Nymex delivery hub were little changed at 21.3 million barrels.
Offsetting the rise in crude stocks were inventory draws to both gasoline and distillates, said Smith. “Not surprisingly, implied demand for gasoline was strong last week as gas stations filled up ahead of the July 4 holiday weekend.”
Separately, the EIA reported Thursday that domestic natural-gas supplies rose by 60 billion cubic feet for the week ended July 1. On average, analysts forecast an increase of 73 billion cubic feet, according to a poll conducted by S&P Global Commodity Insights.
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