Oil futures edged lower early Thursday, pausing a rally that saw the U.S. benchmark end the previous session at a 2023 high.
Price action
-
West Texas Intermediate crude for September delivery
CL00,
+0.27% CL.1,
+0.27% CLU23,
+0.27%
fell 40 cents, or 0.5%, to $84 a barrel on the New York Mercantile Exchange, after ending Wednesday at its highest since Nov. 16. -
October Brent crude
BRN00,
-0.09% BRNV23,
-0.09% ,
the global benchmark, was down 22 cents, or 0.3%, at $87.33 a barrel on ICE Futures Europe. It finished Wednesday at its highest since Jan. 23. -
Back on Nymex, September gasoline
RBU23,
+1.42%
dropped 1% to $2.901 a gallon, while September heating oil
HOU23,
-1.23%
was off 0.4% at $3.191 a gallon. -
September natural gas
NGU23,
+0.83%
dropped 4.5% to $2.826 per million British thermal units.
Market drivers
Crude oil prices have risen sharply since late June, finding support on supply concerns as Saudi Arabia implemented a voluntary production cut of 1 million barrels a day in July, which it recently announced would be extended through September. Russia has also moved to limit crude exports, extending an additional reduction of 300,000 barrels a day through the end of September.
Crude had previously suffered amid disappointment over China’s economic performance following the lifting of COVID curbs late last year, but crude has this week shaken off further signs of weakness in China’s economy.
“There was a time not long ago when if China sneezed, oil markets would tank,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
“However, Saudi and Russian production cuts, providing the China offset, and resilient U.S.-driving season demand round out the new bullish oil market thesis,” he said. “Yes, the more OPEC+ cuts production in the middle of the peak U.S. summer driving season, predictably, the higher oil prices will go.”
That said, rising fuel prices are triggering “alarm bells” in capital markets, Innes observed, raising questions about expectations for a smooth, continued fall in inflation pressures.
Related: Why fuel inflation ‘whack-a-mole’ may complicate Fed’s job in months ahead
The U.S. July consumer price index, released Thursday morning, rose to 3.2% year-over-year from to 3% in the prior month and was the first increase in13 months. Inflation has eased considerably since hitting a 40-year high of 9.1% in the middle of 2022. The core rate of inflation, which strips out volatile food and energy prices, slowed to 4.7% year over year from 4.8%, its lowest rate in almost two years.
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The Organization of the Petroleum Exporting Countries, or OPEC, on Thursday left its forecasts for 2023 and 2024 global demand growth for crude unchanged. In its monthly report, OPEC said it expects demand this year to grow by 2.4 million barrels a day, followed by 2.2 million barrels a day, or mbd, in 2024.
The Energy Information Administration on Thursday reported that natural gas in storage rose by 29 billion cubic feet last week. Analysts surveyed by S&P Global Commodity Insights, on average, had forecast an injection of 24 billion cubic feet.
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