Oil futures gained on Thursday, with U.S. and global crude benchmarks settling at their highest prices in a week, rebounding from losses a day earlier brought on by data showing a large weekly jump in U.S. crude inventories.
Data from China showing refinery runs increased in May, along with signs of stronger U.S. gasoline consumption helped boost traders’ outlook for energy demand.
Price action
-
West Texas Intermediate crude for July delivery
CL00,
+1.50% CL.1,
+1.16% CLN23,
+1.16%
rose $2.35, or 3.4%, to settle at $70.62 a barrel on the New York Mercantile Exchange after losing 1.7% on Wednesday. -
August Brent crude
BRN00,
-0.46% BRNQ23,
-0.46% ,
the global benchmark, gained $2.47, or 3.4%, to settle at $75.67 a barrel on ICE Futures Europe. Brent and WTI oil futures both settled at their highest since June 8, according to Dow Jones Market Data. -
Back on Nymex, July gasoline
RBN23,
+1.28%
rose 3.4% to $2.64 a gallon, while July heating oil
HON23,
+2.84%
climbed 5.2% at $2.48 a gallon. -
July natural gas
NGN23,
+3.40%
rallied by 8.2% to $2.453 per million British thermal units, the highest finish since May 19.
Market drivers
The market has seen mixed economic data out of China, to the point where China has cut interest rates and talked of more stimulus, but “China’s oil demand is not really fitting the slow-down narrative,” said Phil Flynn, senior market analyst at Price Futures Group, in Thursday’s daily report.
Data from China’s National Bureau of Statistics showed that oil refinery throughput in May rose 15.4% year over year, Reuters reported. That brought May throughput to 62 million metric tons, the second-highest monthly total on record behind 63.3 million metric tons in March, the report said. China is the world’s second-biggest oil consumer.
This comes against a “backdrop of strong demand in the U.S. that should stay strong after the Federal Reserve took a pause on its rate-hiking cycle and seems to be backing off the predictions of a recession later this year,” said Flynn.
The market’s hopes that the rate-hiking cycle would be ending soon were “dashed,” with the Fed more than likely to raise rates two more times this year, Flynn told MarketWatch late Wednesday.
“That put a damper on the oil trade,” he said. However, the economic growth rate still remains strong and that means demand for oil “should still be pretty good, so if the Fed doesn’t break the economy,” he said, oil prices should find support.
The Energy Information Administration on Wednesday reported that U.S. commercial crude inventories rose by 7.9 million barrels for the week ending June 9. The EIA data also included an upward adjustment of 1.937 million barrels a day to petroleum supplies. Multiplied by 7 days, that’s about 13.56 million barrels added to petroleum stockpiles.
Tyler Richey, co-editor at Sevens Report Research, pointed out that the EIA showed that the four-week moving average of gasoline supplied, a proxy for consumer fuel demand, rose to a new 18-month high of 9.24 million barrels a day. That suggests that the trend in gasoline demand is “one that is increasing, and that is a good thing for the time being,” he said.
“Consumer gasoline demand remains strong and according to the latest data, it’s getting stronger as we start the summer driving season,” said Richey. However, “oil traders are looking at the macro picture with a still-aggressive Fed threatening the economy and an already deeply inverted Treasury yield curve forecasting a recession within the next few quarters.”
Natural-gas futures, meanwhile, ended sharply higher Thursday after the EIA reported a smaller-than-expected climb of 84 billion cubic feet in U.S. natural-gas supplies in storage for the week ending June 9.
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