Futures Movers: Oil prices move higher, look to erase a weekly loss as tight supplies offset recession worries

by | Jun 24, 2022 | Stock Market

Crude prices were up sharply on Friday, rebounding from back-to-back session declines and poised to erase their loss for the week, as support from tight oil supplies offset worries that economic slowdowns will hit demand.Price action
West Texas Intermediate crude for August delivery 
CL.1,
+3.16%

CLQ22,
+3.16%
 rose $4.14, or 4% to $108.41 a barrel. The contract settled at $104.27 a barrel on the New York Mercantile Exchange on Thursday, with prices based on the front month at their lowest since May 10, according to Dow Jones Market Data. A week ago, the contract settled at $107.99.

Front month August Brent crude 
BRN00,
+2.71%

BRNQ22,
+2.82%,
the global benchmark, rose $3.79, or 3.4%, to $113.84 a barrel, a day after settling at the lowest since May 18 on ICE Futures Europe. The contract trades just above the week-ago finish of $113.12.

Back on Nymex, July gasoline 
RBN22,
+1.27%
rose 2.2% to $3.8501 a gallon, while August heating oil 
HOQ22,
+0.42%
was up 0.9% at $4.3779 a gallon.

July natural gas 
NGN22,
-0.48%
 traded at $6.232 per million British thermal units, down 0.1%, after ending Thursday at the lowest since April 6.

Market drivers Oil prices settled lower in of the past two trading sessions, with the commodity pressured by “recession fears as central banks across the world tighten monetary policy in the face of soaring inflation,” said Lukman Otunuga, manager, market analysis at FXTM.

“However, downside losses remain cushioned by persistent supply constraints and tightening market conditions,” he told MarketWatch. “Volatility could be the name for oil as the commodity continues to be pulled and tugged by conflicting forces.” Oil was tracking U.S. equity futures higher on Friday, with gains stemming from one emerging viewpoint that the Fed’s rate hike ambitions will get curtailed by a recession. “Prices have dropped despite continued signs that the crude oil and especially the fuel product market remain very tight, the latter being highlighted through near record refinery margins, which would have come down if demand was easing,” said Ole Hansen, head of commodity strategy at Saxo Bank, in a note to clients. “In the short term, we will see a battle between macroeconomic focused traders, selling oil as a hedge against recession, and the physical market where price-supportive tightness remains,” he said, in a note to clients. Inventory data from the Energy Information Administration, originally expected Thursday, have been delayed due to “systems issues.” The government agency says it will release delayed data as soon as possible but for now, it marked the release date for the weekly petroleum status report as “TBD” for to be determined. The Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, are set to meet next week to review the market and decide on oil output levels. Michael Lynch, president at Strategic Energy & Economic Research, recently told MarketWatch that OPEC+ is likely to “continue the monthly [output] increases as programmed.” “The smaller players will resist further increases since their production is maxxed out, and the Russians will not want to see others taking their market share,” he said. “The Saudis will try to maintain strong cooperation against future needs.” Read: Don’t expect any surprises from OPEC+, even as recession worries weigh on oil prices

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