OIL & GAS ON DECLINE
WTI crude futures fell more than 3% to below $100 per barrel on Tuesday, extending losses from the previous session, as fresh Covid-19 curbs in top importer China and mounting fears of a global economic slowdown weighed on the market. About 30 million people in China are under some form of movement restrictions as the country grapples with resurgent virus outbreaks, with a highly-contagious Omicron subvariant being detected in Shanghai. Oil prices have also been declining since mid-June on recession fears as central banks race ahead with aggressive rate hikes to combat surging inflation. Moreover, President Joe Biden is set to visit Saudi Arabia this week amid efforts to bring down energy prices. Meanwhile, persistent supply concerns kept markets on edge, as major producers are limited by capacity constraints while Russian supply remains mired in sanctions due to its invasion of Ukraine.
US natural gas futures extended gains towards the $7.00/MMBtu mark, recovering further from an over three-month low of $5.35/MMBtu touched earlier this month, supported by strong domestic and international demand. Prospects of increasing need for cooling as the weather turned hotter in the United States and continued robust demand from Europe as Nord Stream pipeline gas flows are down amid seasonal works have been driving prices higher. Refinitiv expected average US demand, including exports, to rise to 99.0 bcfd this week from 96.2 bcfd last week. In addition, EIA data showed US utilities added 60 billion cubic feet of gas to storage during the week ended July 1, much less than market expectations of 74 billion cubic feet.
Heating oil futures hovered around the $3.75/gallon level, as traders balanced low demand prospects with fears of tight supplies. growing recession fears spurred by aggressive monetary tightening from major central banks continue to weigh on demand outlook. On the supply side, possible disruptions at the Caspian Pipeline Consortium, tightened sanctions on Iran by the US, and production limitations from OPEC members are set to keep crude oil supplies lower in an already tight market caused by the Russian-Ukraine war. Meanwhile, latest data from the EIA showed that heating oil stocks fell for the fifth consecutive week to 46 thousand barrels, but below market expectations of a 50 thousand barrels decline.
Gasoline futures eased to under the $3.4 per gallon mark, on course to close the week sharply lower as concerns of poor demand overcame limited refining capacity in the US and abroad. EIA data showed that gasoline product supplied, the preferred gauge of weekly demand, was more than 5% lower in June than the corresponding period of last year, despite the recent jump ahead of the July 4th weekend. The data adds to worries that demand for energy will decrease as the Federal Reserve is set to continue hiking interest rates after minutes from its last meeting pointed to consensus between policymakers that inflation needs to come down, even if it hampers growth. On the other hand, gasoline inventories decreased more than expected on the week ending July 1, exacerbating fears of tight supply.
