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Oil Futures on Track for Weekly Gains


Price Action

  • West Texas Intermediate (WTI) crude for August delivery rose 0.4% to $72.10 a barrel on the New York Mercantile Exchange, marking a 2% weekly increase.
  • September Brent crude, the global benchmark, traded at $76.76 a barrel on ICE Futures Europe, gaining 0.3% and advancing 1.8% for the week.
  • August gasoline rose 0.5% to $2.556 a gallon, with a weekly increase of 0.5%, while August heating oil was up 0.6% at $2.495 a gallon, set for a 1.9% weekly rise.
  • August natural gas rose 1% to $2.625 per million British thermal units but is on track for a 5.3% weekly drop.

Market Drivers

Crude prices received support after the Energy Information Administration reported that U.S. commercial crude inventories fell by 1.5 million barrels for the week ended June 30. This follows consecutive weekly declines.

According to analysts polled by S&P Global Commodity Insights, the report was anticipated to show a decline of 3.6 million barrels.

Crude Market Analysis Reveals Mixed Trends

The latest report from the Energy Information Administration (EIA) uncovered notable declines in weekly inventories. Gasoline saw a decrease of 2.5 million barrels, while distillates experienced a reduction of 1 million barrels.

Despite this, the crude market has found itself locked in a trading range. Concerns over global demand, fueled by worries about interest rate hikes from major central banks like the Federal Reserve, limit any potential upside. Additionally, China’s lackluster economic recovery after the easing of COVID restrictions adds to the uncertainties.

Examining the physical market for crude, there is a mixed outlook. Notably, prices for Forties crude, considered a crucial marker in setting the Brent price due to its ties to the North Sea, have been softening. Michael Tran, an analyst at RBC Capital Markets, comments on this development.

Taking into account the sluggishness observed in the physical market over recent quarters, deploying a confident bullish approach to Brent spreads becomes challenging without clear indications of accelerated physical market clearing. Furthermore, the soft market pricing currently reflects minimal margin for error.

Looking ahead, Tran explains that any significant signs of physical strength will likely trigger a swift and substantial shift in summer pricing. As the market dynamics take a more positive turn, a new trend may emerge with increased momentum.

Overall, while uncertainties persist, attentive observations of the physical market’s performance provide insights into potential future developments.

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