CANBERRA: Oil settled with a modest loss Thursday, following sharp declines in the prior session, as data showing that the global market remains awash in surplus oil, rising U.S. crude production and weak domestic gasoline demand kept pressure on prices.
Natural-gas futures, meanwhile, rallied to their highest finish of the month to date, with traders encouraged by a rise in weekly U.S. supplies of the fuel that came in below market expectations. July West Texas Intermediate crude CLN7, +0.74% fell 27 cents, or 0.6%, to settle at $44.46 a barrel on the New York Mercantile Exchange after losing 3.7% a day earlier. For a second-straight session, it finished at its lowest level since Nov. 14, FactSet data show. August Brent crude LCOQ7, +1.04% on London’s ICE Futures exchange gave up 8 cents, or 0.2%, to $46.92 a barrel. Oil prices tanked by nearly 4% to their lowest level since November Wednesday, following U.S. Energy Information Administration data that showed the decrease in crude stockpiles last week was smaller than anticipated.
Compounding the woes was the unexpected increase in gasoline stocks, surprising many traders and analysts who expected much of the excess gasoline to be mopped up during the U.S. summer driving season. “The outlook for the energy market remains decidedly bearish,” said Tyler Richey, co-editor of the Sevens Report. OPEC’s agreement with non-OPEC members “remains in a fragile state as none of those participating are particularly happy about the arrangement, and their active forfeiture of market share to U.S. shale producers,” he said in his latest report. That raises the odds of ‘cheating’ or the deal crumbling all together.”
In the U.S., the trend of rising production remains strong, gasoline demand has been “soft” so far, and “oil production is expected to continue to rise steadily this summer,” said Richey. On Nymex, July gasoline RBN7, +1.38% and July heating oil HON7, +1.04% each added less than half a cent, with gasoline ending at $1.436 a gallon and heating oil at $1.415 a gallon. Strength in the U.S. dollar, with the ICE U.S. Dollar Index DXY, -0.19% up 0.5% on the back of the Federal Reserve’s hawkish stance Wednesday on future interest-rate hikes, also put pressure on dollar-denominated prices of oil.