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Oil prices extend slide to finish at their lowest in more than 3 weeks

MarketWatch logo MarketWatch 2/2/2023 Myra P. Saefong
© Mario Tama/Getty Images

Oil futures declined on Thursday to mark their lowest finish in more than three weeks, with global benchmark Brent prices down a fifth straight session.

Prices for Brent, as well as U.S. benchmark West Texas Intermediate crude, fell more than 3% Wednesday, when weekly data that showed a sixth consecutive weekly build in U.S. crude inventories.

Price action
  • West Texas Intermediate crude for March delivery fell 53 cents, or 0.7%, to settle at $75.88 a barrel on the New York Mercantile Exchange, with front-month prices settling the lowest since Jan. 10, according to Dow Jones Market Data. Prices on Wednesday lost 3.1%.
  • April Brent crude the global benchmark, fell 67 cents, or 0.8%, to $82.17 a barrel on ICE Futures Europe, also settling at the lowest since Jan. 10.
  • March gasoline settled at $2.4523 a gallon, down nearly 0.1%, while March heating oil fell 1.8% to $2.8967 a gallon.
  • March natural gas declined by 0.5% to $2.456 per million British thermal units after posting a loss of nearly 8.1% on Wednesday.
Market drivers

Crude prices finished lower on Thursday after data released Wednesday that showed U.S. inventories rose by 4.1 million barrels last week, far exceeding analyst estimates and marking the sixth straight weekly rise. Product inventories also rose.

“The big build in U.S. inventory data hung like an anvil around the market neck,” said Stephen Innes,  managing partner at SPI Asset Management.

Reports pointing to continued strength in Russian exports ahead of a price cap on Russian oil product exports that’s due to take effect on Feb. 5 have helped soothe supply worries, analysts said.

Crude failed to find a lift after stocks rallied in the wake of Wednesday’s Federal Reserve decision. The central bank raised its policy interest rate by a quarter of a percentage point, as expected, but investors continued to bet on rate cuts by year-end in defiance of the central bank’s forecasts.

See: ‘Decidedly less hawkish’: 4 takeaways from Powell’s press conference as Fed hikes rates again

The Bank of England on Thursday raised interest rates by half a percentage point, and the European Central Bank was expected to deliver a half-point hike later Thursday.

Bullish demand-side factors “have lost some of their luster over the last week and still stubbornly hawkish central banks threaten the broader narrative that demand will be as strong as many initially hoped coming into the year,” said analysts at Sevens Report Research, in a note. “To that point, the fact that oil was unable to meaningfully bounce with stocks when the major indexes reversed higher [Wednesday afternoon] suggests more weakness may be in store for the oil market.”

Natural-gas futures, meanwhile, failed to hold onto early gains after Wednesday’s sharp decline.

The U.S. Energy Information Administration reported Thursday that domestic natural-gas supplies fell by 151 billion cubic feet for the week ended Jan. 27 to total 2.538 trillion cubic feet.

That compared with an average analyst forecast for a decline of 146 billion cubic feet, according to a survey conducted by S&P Global Commodity Insights. The latest data, however, included an upward revision to total stocks for the week ended Jan. 20 — to 2.734 tcf from 2.729 tcf, the EIA said.

“Unless it gets cold soon and stays that way versus the averages, EIA storage is likely to end winter withdrawal season at a strong surplus to last year,” said Robert Yawger, director of energy futures at  Mizuho Securities USA, in a daily report.


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