Oil futures fell on Wednesday, with U.S. prices headed toward a two-week low as domestic crude inventories climbed for a second week and traders awaited a decision by the Federal Reserve amid jitters over the economic outlook.
West Texas Intermediate crude for July delivery
fell $1.34, or 1.1%, to $117.59 a barrel on the New York Mercantile Exchange. A settlement around this level would be the lowest for a front-month contract since June 2, FactSet data show.
July natural-gas futures
rose 5.3% to $7.568 per million British thermal units, after losing more than 16% Tuesday to end at a five-week low.
Oil was extending losses seen after crude futures turned south in Monday’s session. While a number of factors were cited as a drag on crude, some analysts saw the softness as largely tied to jitters over the Fed. Other factors included optimistic remarks around the Iran nuclear deal, a waiver extension allowing U.S. banks to process Russian energy transactions, and a report that a U.S. senator intends to propose a federal surtax on certain oil companies in a move to curb inflation.
“It appears that market participants got cold feet ahead of today’s Fed decision, as a stronger tightening of monetary policy could have negative effects on oil demand,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
The Federal Reserve is widely expected to lift the fed-funds rate by 75 basis points, or three-quarters of a percentage point, when it concludes its two-day policy meeting at 2 p.m. Eastern, though Fed watchers say such an outsize move isn’t assured.
If the Fed is more hawkish “we could see risk off in all asset classes, but…we feel this will be temporary and crude will resume its upward tract,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch.
The International Energy Agency on Wednesday said it expects global demand for oil to rise above pre-pandemic levels next year following three years of COVID-19 lockdowns and the economic shock of the Ukraine war. Much of the growth in demand next year will be driven by China, as it emerges from stop-start COVID-19 lockdowns, while developed economies are expected to contend with a worsening economic outlook and rampant inflation, the Paris-based agency said in its monthly report. ture.
President Joe Biden on Wednesday wrote letters to U.S. oil refiners, calling on them to produce more gasoline and diesel and saying their profits have tripled during a time of war between Russia and Ukraine as Americans struggle with record high prices at the pump.
Natural-gas futures climbed Wednesday, rebounding after more than 16% drop a day earlier to their lowest in five weeks as a delay in repairs to Freeport LNG Development’s liquefaction plant on Quintana Island on Texas’s Gulf Coast was expected to lead to higher inventories of the commodity in U.S. storage.
Oil supply data
On Wednesday, the Energy Information Administration reported that U.S. crude inventories rose for a second straight week, by 2 million barrels for the week ended June 10.
The EIA was expected to show crude inventories down by 1.1 million barrels on average, according to analysts surveyed by S&P Global Commodity Insights. The American Petroleum Institute on Tuesday reported a 736,000-barrel increase, according to sources.
The EIA reported a weekly inventory decline of 700,000 barrels for gasoline, while distillate supplies climbed by 700,000 barrels. The S&P Global Commodity Insights survey had forecast an increase of 100,000 barrels for gasoline and an inventory decline of 300,000 barrels for distillates.
The EIA data showed crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 800,000 barrels for the week, while stocks in the Strategic Petroleum Reserve fell to 511.6 million barrels from 519.3 million the week before.