Oil prices are once again under pressure as the market seeks direction

Oil prices traded lower on Thursday, wiping out some of the previous day’s gains as the commodities market struggled to balance amid a tension between supply and demand.

Price promotion
  • West Texas Intermediate Crude Oil For Delivery In June CL00,
    -1.48%

    CLM22,
    -1.48%

    CL.1,
    -1.48%
    fell about $1.84, or 1.8%, to $103.78 a barrel. The contract climbed 6% to trade at $105.71 a barrel on the New York Mercantile Exchange on Wednesday.

  • July Brent raw BRN00,
    -1.53%

    BRNN22,
    -1.53%
    the global benchmark, fell $1.68, or 1.7%, to $105.83 a barrel. The contract was up 4.9% and ended Wednesday at $107.51 a barrel on ICE Futures Europe.

  • June natural gas NGM22,
    -1.95%
    fell 2.3% to $7.46 per million UK thermal units, up 3.5% the previous session.

  • June gasoline RBM22,
    +0.08%
    fell 0.3% to $3,674 a gallon. June fuel oil HOM22,
    -2.81%
    fell 2.9% to $3,834 a gallon.

Market drivers

Wednesday’s gains came amid improvement on China’s COVID front, bullish forecasts for oil by Morgan Stanley, and as the market looked past a stronger-than-expected rise in US consumer price inflation to 8.3% in April.

Oil held steady after the Energy Information Administration said US crude inventories rose 8.5 million barrels last week. Analysts polled by S&P Global Commodity Insights had forecast an average decline of 1.8 million barrels.

But the US and Brent oil have lost more than 5% each this week as investors deal with a range of factors that influence both supply and demand.

Thursday’s drop in oil prices “highlights how traders are struggling to correctly price the world’s major energy contracts as focus continues to alternate between China’s lockdowns hurting demand and high inflation killing economic growth,” said Ole Hansen, chief of commodity strategy. from Saxo Bank.

That’s because the EU has yet to agree on sanctions against Russian crude,” while Saudi Arabia and the UAE have warned that all energy sectors will run out of capacity. The underlying market appears to be supported as stocks of fuel, such as diesel and gasoline, continue to decline,” said Hansen.

Monthly oil reports were released from both the International Energy Agency and OPEC. The IEA warned that tougher sanctions on Russia’s oil exports could cut crude oil production by nearly two decades.

The Organization of the Petroleum Exporting Countries, meanwhile, has lowered its forecast for annual global oil demand to 3.4 million barrels per day by 2022, down 300,000 barrels per day from April’s forecast.

Gas prices shot up in Europe, partly due to a failure in a Russian pipeline that runs through Ukraine. Also, German Economy Minister Robert Habeck has accused the Russians of weaponizing energy after Moscow reportedly announced sanctions on Western energy companies late Wednesday and European gas supplies plummeted.

Russia reportedly seized a German unit of Gazprom, whose supplies to Germany were reduced, although that accounts for just 3% of the country’s imports from Russia, according to Bloomberg. The operator of Ukraine’s natural gas pipeline on Wednesday halted Russian shipments through a major hub in the east of the country.

Natural gas at the Netherlands-based TTF trading hub rose 20% for the July contract to €115,570 per megawatt. UK natural gas prices contract GWM00,
+35.97%
rose 37% to $191 pence per therm.

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