Futures Movers: U.S. oil prices end lower, but Brent oil gains after back-to-back losses
Oil futures ended on a mixed note Tuesday, with U.S. prices settling at their lowest in over a week, but global benchmark crude posting a gain after back-to-back session declines.
Oil found support after comments from U.S. House Majority Leader Steny Hoyer lowered expectations that the U.S. will tap the Strategic Petroleum Reserve to help lower gasoline prices.
However, the International Energy Agency said it expects growth in crude-oil production to help ease tight global supplies, putting some pressure on prices.
“The market is now thinking that it’s less likely that the U.S, will use the [SPR] is a band aid for higher gasoline prices,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
Commodities Corner: Why tapping the SPR is one of many ‘bad’ options to ease gasoline prices
Hoyer told reporters that he doesn’t agree with Senate Majority Leader Chuck Schumer’s recent call for tapping the SPR to lower gasoline prices, Reuters reported Tuesday.
Separately, Stephen Nalley, the Energy Information Administration’s acting administrator, said during a Senate Committee hearing on domestic and international energy price trends that the impact of a release from the SPR would be “short-lived.”
“Apparently, common sense may be taking hold as everyone knows that using the SPR to try to lower gasoline prices will only be a short-term band aid and not solve the underlying problem,” said Flynn.
““Apparently, common sense may be taking hold as everyone knows that using the SPR to try to lower gasoline prices will only be a short-term band aid and not solve the underlying problem.””
— Phil Flynn, The Price Futures Group
West Texas Intermediate crude for December delivery
CL00,
-0.02%
CLZ21,
-0.02%
fell 12 cents, or nearly 0.2%, to settle $80.76 a barrel on the New York Mercantile Exchange, the lowest front-month contract finish since Nov. 4, according to Dow Jones market Data.
January Brent crude
BRN00,
+0.17%
BRNF22,
+0.17%,
the global benchmark, rose 38 cents, or 0.5%, at $82.43 a barrel on ICE Futures Europe.
Prices for both contract had traded lower early Tuesday, with WTI prices touching a low at $80.03 amid signs of a recovery in global crude supplies.
In monthly reports, both the Organization of the Petroleum Exporting Countries and the IEA have “stated that global oil markets may become oversupplied before the end of the year, with the former citing a fragile demand recovery due to the ongoing pandemic, while the latter pointed to a recent trend of strong production gains, especially out of the U.S.,” said Christin Redmond, commodity analyst at Schneider Electric, in a daily note.
“U.S, offshore production has seen a strong recovery from the impacts of Hurricane Ida, while output from the Permian region charted strong gains over the past couple of months,” she said, adding that the U.S. government expects Permian oil output to reach a record in December.
In a monthly report issued Monday, the EIA forecast a rise of 67,000 barrels per day in oil production in the Permian region to 4.95 million barrels per day in December.
The IEA, in its monthly report released Tuesday, said the tight supply and demand balance in the global oil market could be set to ease. The IEA said it expects output to rise by 1.5 million barrels a day in the remainder of 2021, with the U.S., Saudi Arabia and Russia accounting for around half of that amount.
Flynn said the IEA is “really counting on U.S. energy producers to fill the void,” but may be “overly optimistic about where we will be next year, especially with new regulations coming down from the Biden administration.”
In a monthly report last week, OPEC trimmed its outlook for growth this year, citing the effect of high prices.
Traders also eyed developments tied to Iran. The Wall Street Journal reported Tuesday that Iran has resumed production of equipment of advanced parts for its nuclear program, dulling the likelihood that it will reach a deal with world powers to revive the 2015 nuclear agreement aimed at curbing its nuclear plans.
Meanwhile, data showing a better-than-expected U.S. retail sales number “gave the Federal Reserve a little bit more wiggle room” when it comes to tapering asset purchases and increasing interest rates, said Flynn.
On top of that, St. Louis Fed President James Bullard on Tuesday suggested that the Fed should raise interest rates twice next year and speed up the tapering of its bond purchases. Those comments caused oil prices to pull back early Tuesday, said Flynn.
Meanwhile, December natural-gas futures
NGZ21,
+2.85%
jumped 3.2% to $5.177 per million British thermal units, tracking a rise in European prices after German regulators suspended the certification process for the Nord Stream 2 pipeline that would carry natural gas from Russia to Germany.
In other Nymex energy action, December gasoline
RBZ21,
+1.15%
added 0.9% to $2.35 a gallon and December heating oil
HOZ21,
+1.42%
rose 1.4% to $2.431 a gallon.
The EIA will release its weekly data on U.S. petroleum supplies Wednesday.
On average for the week ended Nov. 12, analysts expect the EIA to report inventories declines of 2.5 million barrels for crude oil, 100,000 barrels for gasoline and 1.3 million barrels for distillates, according to a survey conducted by S&P Global Platts.
