Oil futures climbed on Friday, with prices for the global benchmark notching their first monthly gain of the year, along with a fourth quarterly loss in a row.
Worries over the economic outlook and energy demand have pulled U.S. and global crude prices down year to date.
Price action
-
West Texas Intermediate crude for August delivery
CL00,
-0.27% CL.1,
-0.27% CLQ23,
-0.27%
rose 78 cents, or 1.1%, to settle at $70.64 a barrel on the New York Mercantile Exchange. It ended Friday with a gain of almost 3.8% for the month, but lost about 6.7% lower for the quarter, according to Dow Jones Market Data. -
August Brent crude
BRNQ23,
the global benchmark, added 56 cents, or nearly 0.8%, at $74.90 a barrel on ICE Futures Europe, with prices up 3.1% for the month and down 6.1% for the quarter. September Brent
BRN00,
-0.29% BRNU23,
-0.29% ,
which became the front month at the session’s end, climbed 90 cents, or 1.2%, to $75.41 a barrel. - Back on Nymex, July gasoline added 0.6% to $2.63 a gallon, with prices up 2.9% for the month, while July heating oil rose nearly 1.4% to $2.45 a gallon, for a gain of almost 8.4% for the month. The July contracts expired at the day’s settlement.
-
August natural gas
NGQ23,
-0.86%
rose 3.6% to $2.80 per million British thermal units. Prices added more than 23% for the month and over 26% for the quarter, but lost 1.6% for the week.
Market drivers
The U.S. economy is in the “midst of the most anticipated recession that has yet to come, and yet the oil price reflects such discount,” said Manish Raj, managing director at Velandera Energy Partners.
As the U.S. GDP print continues to be robust, oil’s monthly gain shows a “toning down [of] the pessimist recession scenario in favor of a possible soft landing,” he told MarketWatch.
Oil futures marked monthly gains but WTI also saw a second consecutive quarterly decline — off nearly 7% — and Brent logged a fourth straight quarterly loss — down over 6%.
“Like most assets, right now oil is beholden to the economy,” analysts at Sevens Report Research wrote in Friday’s newsletter.
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“If the soft landing (or even no landing) occurs, then that will be a solid tailwind on oil and other industrial commodities and country oversupply fears,” they said. “If a hard landing looks more likely in [the second half of the year], then a sharp drop in oil isn’t out of the question given oversupply concerns,” especially from Russia, which is pumping as much as they can to fund the war.
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Looking ahead, “the next six weeks will dictate the next six months” for the oil market, wrote strategists at RBC Capital Markets, led by Michael Tran, in a research note dated Friday.
The physical market has been “sloppy all year,” but July should, in theory, be tight, they said. “Saudi production cuts, the seasonal return of [more than 2 million barrels a day] of refinery capacity, and leading indicators of strong Chinese crude imports should all bode well for a tighter physical market in July.”
U.S. data due next week includes readings from manufacturing and services sector purchasing managers and the June jobs report. The figures are unlikely to dispel the widespread gloom, said Barbara Lambrecht, commodity analyst at Commerzbank, in a note.
“If sentiment were to have brightened in the manufacturing and service sectors, market participants would only interpret this as meaning that the Fed will have room to step on the brakes to a greater extent,” she wrote. This would result in oil demand weakening, “not in the short term, but with an increased probability in the medium term.”
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