WTI crude futures held above $96 per barrel on Friday and were set to end the week higher after another period of heightened market volatility as traders weighed signs of tightening supplies against worries over an economic slowdown. Shell CEO Ben van Beurden told Bloomberg TV on Thursday that there is more upside than downside for oil prices as “demand hasn’t fully recovered yet and supply is definitely tight.” Total Energies CEO Patrick Pouyanne shared the same view, saying oil production could not keep up with recovering demand. The OPEC+ is scheduled to meet on August 3 where the US is hoping for an announcement of additional supply, although analysts warned that member countries are already struggling to meet production quotas due to underinvestment in oil fields. Meanwhile, the US economy shrank for a second straight quarter, fueling recession fears as the country grapples with soaring inflation and rising interest rates.
US natural gas futures corrected to around $8.5/MMBtu as investors unwound some long positions following a massive rally that drove prices to a record level of $9.7/MMBtu earlier this week. Still, the commodity more than doubled in value in July, putting it on track for one of the best monthly performances ever, with higher domestic and international demand being the primary driver. This summer, many regions in the United States have experienced extreme heat, with demand for electricity reaching several record highs. Soaring international demand is also adding to the bullish outlook. Russia's Gazprom said it would reduce flows through the Nord Stream pipeline, citing issues with turbines, delivering only 33 million cubic meters daily, roughly 20% of its capacity, forcing European buyers to find replacements.
Gasoline futures rose to a 2-week high of around $3.4 per gallon, supported by weak dollar and as fears of tight supplies more than offset concerns over weak demand. Fall in dollars makes it cheaper for foreign buyers to obtain the dollar-denominated commodity. Also supplies of crude oil are set to remain lower as Biden failed to secure a pledge from Arab leaders to boost production despite a top US energy envoy indicating confidence that key producers have spare capacity to produce oil. Prices of gasoline, a derivative of crude oil, is already under pressure due to disruptions in trading from Russia as the West continues to sanction Moscow for its invasion of Ukraine. Further, the governor of Russia’s central bank has said that Russia would not supply crude oil to any country which caps prices. Meanwhile, data from the EIA showed that gasoline stocks rose by a slower pace of 3.5 million barrels in the week ended July 15th, compared to a 5.8 million barrels increase last week.
Heating oil futures hovered around $3.6 per gallon, remaining nearly 17% below the 14-year high of $4.44 hit in June, as traders digested the latest EIA inventory data amid uncertain demand and supply outlook. Heating oil stocks fell by a much softer 12 thousand barrels in the week ended July 22nd, compared to a whopping 298 thousand barrels decline in the prior week, as reported by EIA. On the demand side, cuts in Russian gas flows to Europe through the Nord Stream 1 pipeline could force consumers switch to oil.
However, growing recession concerns spurred by aggressive monetary tightening and against background of slowing economic data are set to weigh on the demand outlook.