U.S. oil prices settle at a 6-week low as demand worries resurface

Oil futures fell sharply on Wednesday, with the US crude oil benchmark set at its lowest price in about six weeks, while investors refocused on demand concerns amid growing expectations of recession.

Price action
  • West Texas Intermediate Cru for August CL.1,

    it fell $ 3.33, or 3%, to close at $ 106.19 a barrel on the New York Stock Exchange, after hitting a low of $ 101.53. First-month contract prices saw their lowest settlement since May 12, according to Dow Jones Market Data.

  • August Brent cru BRNQ22,

    the world benchmark, fell $ 2.91, or 2.5%, to $ 111.74 a barrel on ICE Futures Europe, the lowest settlement since May 18.

  • Back to Nymex, July gasoline RBN22,
    + 0.65%
    rose 1% to $ 3.8341 a gallon, while heating oil in July HON22,
    + 0.24%
    added 1.1% to $ 4.4046 a gallon.

  • Natural gas futures for July NGN22,
    + 0.15%
    rose 0.7% to $ 6.858 per million British thermal units.

Reads: Energy investments are not enough to solve the energy crisis, says the IEA

What is driving the market?

Investors were once again focusing on the potential for a recession in the U.S. and elsewhere that could reduce demand for energy products.

“Oil is lower due to demand concerns, the prospect of a lower gasoline tax in the U.S. and renewed fears of a recession,” said Phillip Streible, chief market strategist at Blue Line Futures.

Meanwhile, Russia “is re-operating near pre-pandemic levels with outflows to China and India that collect most of the oil,” it told MarketWatch.

reads India tells oil companies to load Russian crude at a discount: WSJ

As oil prices fell, U.S. benchmarks also fell before rising on Wall Street on Wednesday, where some strategists have warned that markets are not fully appreciating the possibility of an economic downturn.

“A persistent fall in oil prices will indicate that fears of a global recession are taking advantage and outweigh positive factors such as a tight supply, prospects for Chinese reopening and booming travel,” said Ipek Ozkardeskaya, an analyst. Swissquote senior. Bank, in comments sent by email.

As expected, the White House on Wednesday called on Congress to suspend the federal gas tax for three months and called on states to provide similar relief as consumers struggle with rising prices after the invasion. Russian government in late February.

Reads: What does a federal gasoline tax party mean for energy prices

See also: According to analysts, Biden is unlikely to be authorized by Congress for gas tax

The federal government charges a tax of 18 cents per gallon of gasoline and a tax of 24 cents per gallon of diesel, and some see that any moratorium has only a modest effect on prices. If gas savings were fully passed on to consumers, that would mean a 3.6% savings on the pump when prices average around $ 5 a gallon nationwide, the Associated Press said.

“Biden’s efforts have little impact,” Ozkardeskaya of Swissquote said.

“Releasing strategic reserves and improving relations with Saudi Arabia could hardly alleviate the price of the bomb,” he said. “The federal gasoline tax party is likely to remain ineffective as it won’t help an average SUV driver save significantly, it won’t last beyond the midterm elections, and it may not even have approval. bipartisan, as gas contributes to the road’s trust fund, and suspending it would cut off flow to critical infrastructure. “

Ozkardeskaya said that “the best option is a demand shock caused by the recession to stop the demonstration to throw the [U.S.] price per barrel below the level of $ 100, and ideally around $ 92, the 200-[day moving average]. ”

The U.S. Energy Information Administration’s weekly U.S. oil supply data will be released on Thursday, with a one-day delay this week due to the June Monday holiday.

U.S. crude oil supplies were likely to fall 3.7 million barrels during the week ended June 17, according to an analyst survey conducted by S&P Global Commodity Insights. The survey also showed expectations of weekly inventory increases of 500,000 barrels of gasoline and 600,000 barrels of distillate.

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