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Futures Movers: Oil prices tally first gain in 3 sessions, end higher for the week as supply worries resurface

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Oil futures tallied their first gain in three sessions on Friday, settling higher for the week, after major producers raised output as expected and outages in Libya fed concerns about reduced supply.

What’s happening

Front-month August West Texas Intermediate crude
CLQ22,
+2.53%

CL.1,
+2.53%

rose $2.67, or 2.5%, to settle at $108.43 a barrel on the New York Mercantile Exchange. Prices ended nearly 0.8% higher for the week, according to Dow Jones Market Data. They finished Thursday with a gain of 5.5% for the second quarter and a loss of 7.8% for the month of June.

Read: Energy leads commodities surge with oil up roughly 50% in first half of 2022

September Brent crude
BRNU22,
-0.13%

BRN00,
-0.13%
,
the global crude benchmark, rose $2.60, or 2.4%, to $111.63 a barrel on the ICE Futures Europe, with the contract settling up by 2.3% from the week-ago settlement. It rose 6.4% for the quarter, but fell 6.5% in June.

August natural gas
NGQ22,
+5.14%

NG00,
+5.53%

climbed 31 cents, or 5.6%, to $5.73 per million British thermal units, after plunging nearly 17% on Thursday. It settled 8.8% lower for the week.

Among the petroleum products, August gasoline
RBQ22,
+3.97%

added 4.3% to $3.6878 a gallon, ending the week 2.5% lower, and August heating oil
HOQ22,
+3.44%

settled at $3.9389 a gallon, up 2.8% for the session but down 7.2% for the week.

Read: Gasoline prices have fallen, but probably haven’t peaked yet

What’s driving markets

Oil prices have come off multiyear highs in recent weeks — with Brent retreating from more than $140 a barrel touched in March — amid concerns that slowing economic growth may crimp demand.

However, lingering worries about tight supply, and signs activity in China is picking up, continue to support energy prices.

On Thursday, the Organization of the Petroleum Exporting Countries and its allies confirmed a proposal to boost output by another 648,000 barrels a day in August.

However, the “question on future output levels was left unanswered and this could add to the overall uncertainty,” said Lukman Otunuga, manager, market analysis, at FXTM.

The West would like to see more supply to curtail inflation and reduce reliance on Russian production following the country’s invasion of Ukraine. With that in mind, traders will be keeping a keen eye on whether U.S. President Joe Biden can convince Middle East producers to increase supply further when he visits the region in mid-July.

““With so much going on, July could be a volatile month for the global commodity.””

— Lukman Otunuga, FXTM

“With so much going on, July could be a volatile month for the global commodity,” Lukman told MarketWatch.

Adding to fear about inadequate output was news that Libya’s National Oil Company had declared force majeure on Thursday as the country’s political crisis deepens. Daily exports have fallen to about a third of production seen in “normal circumstances,” NOC said.

“The market is stuck in the push-pull between the current deteriorating macro backdrop and the looming threat of a recession, pitted against the strongest fundamental oil market setup in decades, maybe ever,” said Michael Tran, commodity strategist at RBC Capital Markets, in a recent note to clients.

In addition, strikes next week on Norwegian oil platforms may cut 4% of the country’s production, according to Reuters.

There was better news for U.S. households on Thursday, when natural-gas prices slumped to a three-month low after the extended shutdown of a large liquefied natural-gas plant in Texas helped utilities to boost their stockpiles. Natural-gas futures are well off the 14-year high near $9.50 per mBtu touched less than a month ago.

The natural-gas market “got blindsided” after the Energy Information Administration on Thursday reported a bigger-than-expected weekly rise in supplies, said Phil Flynn, senior market analyst at The Price Futures Group. “That’s raising concerns that the Freeport LNG terminal [outage] is having a bigger impact on supplies and previously thought.”

Read: NOAA’s July weather outlook ‘incrementally positive’ for natural gas, says MKM analyst

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