Oil futures pulled back in Tuesday dealings, after posting a gain of more than 5% in the previous session, as fears of a slowdown in economic growth outweighed ongoing worries over tight crude supplies.Price action
West Texas Intermediate crude for August delivery
fell 96 cents, or 1%, to $101.64 a barrel on the New York Mercantile Exchange.
September Brent crude
the global benchmark, dropped 94 cents, or 0.9%, to $105.35 a barrel on ICE Futures Europe. Both WTI and Brent rose more than 5% on Monday.
Back on Nymex, August gasoline
fell 0.1% to $3.261 a gallon, while August heating oil
dropped 1.5% to $3.6009 a gallon.
August natural gas
shed 3.2% to $7.237 per million British thermal units.
Market drivers Oil rebounded sharply on Monday, with support tied in part to indications President Joe Biden’s visit late last week to Saudi Arabia failed to produce any breakthroughs in terms of increased oil production. While Biden had said he expected “further steps” by the Saudis on oil supply in coming weeks, news reports cited Saudi officials saying market logic would dictate production decisions by the Organization of the Petroleum Exporting Countries and its allies.
Multiple Saudi Arabian officials basically said that President Biden’s visit to the Kingdom last week “had no impact on future production policy plans and that supply and demand, or ‘market logic’ would dictate future policy decisions,” analysts at Sevens Report Research wrote in Tuesday’s newsletter. “That poured cold water on hopes that certain OPEC members would raise output to help balance the market and bring prices at the pump lower.” Bottom line, “supply expectations are largely steady with the Russia/Ukraine war raging on, keeping a fear bid in the market while demand expectations are less certain with worries of a recession still very elevated,” they said. “That will leave the oil market still rangebound between support in the mid $90s and resistance towards $120” a barrel. The upside for oil was limited by fears that persistent inflation will drive the Federal Reserve and other major central banks to continue tightening monetary policy aggressively, threatening a recession or sharp slowdown in economic growth. “Even if OPEC decided to remain timid on its oil production, the higher oil price is the main reason that investors are preparing for recession. And the recession worries are what pull the oil prices lower,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note. Weekly U.S. supply data is expected from the American Petroleum Institute, an industry trade group, after the close on Tuesday. Official government data from the Energy Information Administration is due Wednesday morning. Analysts surveyed by S&P Global Commodity Insights forecast gasoline stocks, as reported by the EIA, to show a counterseasonal rise of 400,000 barrels due to heavy refinery runs. Crude stocks are expected to fall by 200,000 barrels, while distillate supplies are seen rising by 800,000 barrels.