Futures Movers: Oil prices finish higher with traders’ attention ‘shifting between demand and supply’

Price action

• West Texas Intermediate crude for August delivery
  CL.1,
  +0.37%

  CLQ23,
  +0.37%
  rose 28 cents, or 0.4%, to settle at $75.63 a barrel on the New York Mercantile Exchange on the contract’s expiration day. September WTI
  CL00,
  +0.54%

  CLU23,
  +0.54%,
  which is now the front month, gained 36 cents, or 0.5%, to $75.65 a barrel.

• September Brent crude
  BRN00,
  +0.01%

  BRNU23,
  +0.01%,
  the global benchmark, added 18 cents, or 0.2%, at $79.64 a barrel on ICE Futures Europe.

• Back on Nymex, August gasoline
  RBQ23,
  +1.00%
  rose 0.8% to $2.74 a gallon, while August heating oil
  HOQ23,
  +1.00%
  climbed 0.9% at $2.66 a gallon.

• August natural gas
  NGQ23,
  +5.26%
  tacked on 5.9% to $2.76 per million British thermal units with prices for the front month at their highest since June 30, according to Dow Jones Market Data.

Oil supply and demand

“Oil prices could remain volatile over the short term with traders’ attention constantly shifting between demand and supply sides,” said Wael Makarem, senior market strategist, MENA at Exness.

“The efforts led by Saudi Arabia and Russia to cut production levels have been able to push prices out of their range and took the market to the upside this month and could continue to provide strong upside support over the medium term,” he said in market commentary.

The crude market is expected to move into a supply deficit in the second half of the year, while Saudi Arabia and Russia have announced supply cuts.

“Crude markets have recently found firmer footing, which is led by strengthening physical indicators and is consistent with a market pivoting to a deficit,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

“With positioning still light, there is a good chance the rally could extend if recent evidence of Russian supply cuts endures. A big if, mind you, given Russia’s track record of compliance,” he wrote.

So far this year though, oil prices have declined, with weakness attributed to worries that interest-rate rises by global central banks will spark a sharp economic downturn, while a disappointing rebound by China after the lifting of strict COVID-19 curbs has also been a factor.

“The Chinese economic recovery remains softer than previously expected and could continue to weigh on expectations” for demand, said Makarem.

But expectations the Federal Reserve is near the end of its rate-hike cycle as inflation continues to cool have been cited as supportive for crude, which has bounced higher in July.

On Wednesday, oil prices lost ground after the Energy Information Administration said U.S. commercial crude inventories fell by 700,000 barrels for the week ending July 14. On average, analysts polled by S&P Global Commodity Insights had expected the report to show a decline of 2.25 million barrels.

“Traders could focus on economic data from the U.S. next week with the release of U.S. GDP growth figures, while the Federal Reserve is expected to decide on interest rates” Wednesday, said Makarem.

Natural gas rally

On Thursday, prices for natural gas rallied, lifted by “unrelenting heat” and growing expectations for “unseasonal draws” in natural-gas supply, said Phil Flynn, senior market analyst at The Price Futures Group.  

U.S. forecasts called for above-normal temperatures in much of the nation over the six to 10 days.

Read: Why scorching summer temperatures haven’t yet led to a lasting rally for natural gas

“If the heat holds up into August, like some predict — and because we’re seeing a consistent drop in the U.S. rig count, this winter could be more expensive than previously thought by the marketplace,” said Flynn, in a market report.

On Thursday, the EIA reported that U.S. natural-gas supplies in storage rose by 41 billion cubic feet for the week ended July 14.

Analysts had called for a storage increase of 48 billion cubic feet on average, according to a survey conducted by S&P Global Commodity Insights.