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Crude oil futures edged higher Tuesday but held near the lowest levels of the year, as rising fears of escalating conflict between Israel and Iran continue to be outweighed by concerns over a potential U.S. recession and a slowdown in demand for oil and gas.
WTI crude closed Monday at its lowest settlement since early February, and Brent ended at its weakest close since early January, but stocks scored a strong rebound Tuesday, offering some respite for riskier assets.
“It’s quite striking that the oil market so far is not pre-emptively pricing in the risk of what seems to be a very imminent conflict,” S&P Global vice chairman Daniel Yergin said on CNBC.
Traders also were looking at developments around Libya’s 270K bbl/day Sharara oil field, the country’s largest, which reports said was shutting down because of protests.
Also, the Biden administration is seeking to buy up to 3.5M barrels of oil for the U.S. Strategic Petroleum Reserve for delivery in January, the Department of Energy said Tuesday.
Front-month Nymex crude (CL1:COM) for September delivery settled +0.3% to $73.20/bbl, and front-month October Brent crude (CO1:COM) closed +0.2% to $76.48/bbl.
Natural gas futures posted their first gain in five sessions, with the front-month September contract (NG1:COM) settling +3.5% to $2.01/MBtu.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
The U.S. Energy Information Administration added to concerns about falling demand for oil next year caused by an economic slowdown in China.
In its latest Short-Term Energy Outlook, the EIA forecast global crude consumption will total 104.5M bbl/day in 2025, down 200K bbl/day from its previous forecast, which lowers its projected demand growth rate for next year to 1.6%.
The EIA also trimmed its outlook for U.S. oil production growth from last month’s report by 0.2% for this year and 0.6% for 2025.
However, the EIA still expects U.S. production to increase by 2.3% this year to 13.23M bbl/day and an additional 3.5% next year, showing producers are achieving efficiency gains in drilling and fracking that allow them to increase their output.
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