Futures Movers: Oil ends higher on tight supplies, but U.S. prices hold on to a weekly loss on recession worries


Crude futures finished sharply higher on Friday, as tight supplies help prices rebound from back-to-back session declines, but worries that economic slowdowns will hit demand pulled U.S. prices lower for the week.

Price action

West Texas Intermediate crude for August delivery 


 rose $3.35, or 3.2% to settle at $107.62 a barrel. The contract settled at $104.27 a barrel on the New York Mercantile Exchange on Thursday, with prices based on the front month at their lowest since May 10, according to Dow Jones Market Data. For the week prices lost 0.3%.

Front month August Brent crude 

the global benchmark, rose $3.07, or 2.8%, to $113.12 a barrel, a day after settling at the lowest since May 18 on ICE Futures Europe. The contract was unchanged from the week-ago close.

Back on Nymex, July gasoline 

rose 3.2% to $3.8848 a gallon — up 2.4% for the week. August heating oil 

added 0.6% at $4.3629 a gallon, posting a weekly rise of 0.5%.

July natural gas 

 settled at $6.22 per million British thermal units — the lowest since April 6 — down 0.3% for the session and dropping more than 10% for the week.

Market drivers

Oil prices settled lower in the previous two trading sessions, with the commodity pressured by “recession fears as central banks across the world tighten monetary policy in the face of soaring inflation,” said Lukman Otunuga, manager, market analysis at FXTM.

“However, downside losses remain cushioned by persistent supply constraints and tightening market conditions,” he told MarketWatch. “Volatility could be the name for oil as the commodity continues to be pulled and tugged by conflicting forces.”

Oil tracked U.S. equity futures higher Friday, with gains stemming from one emerging viewpoint that the Fed’s rate hike ambitions will get curtailed by a recession.

“Prices have dropped despite continued signs that the crude oil and especially the fuel product market remain very tight, the latter being highlighted through near record refinery margins, which would have come down if demand was easing,” said Ole Hansen, head of commodity strategy at Saxo Bank, in a note to clients.

“In the short term, we will see a battle between macroeconomic focused traders, selling oil as a hedge against recession, and the physical market where price-supportive tightness remains,” he said, in a note to clients.

Inventory data from the Energy Information Administration, originally expected Thursday, have been delayed due to “systems issues.” The government agency says it will release delayed data as soon as possible but for now, it marked the release date for the weekly petroleum status report as “TBD” for to be determined.

The Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, are set to meet next week to review the market and decide on oil output levels.

Michael Lynch, president at Strategic Energy & Economic Research, recently told MarketWatch that OPEC+ is likely to “continue the monthly [output] increases as programmed.”

“The smaller players will resist further increases since their production is maxxed out, and the Russians will not want to see others taking their market share,” he said. “The Saudis will try to maintain strong cooperation against future needs.”

Read: Don’t expect any surprises from OPEC+, even as recession worries weigh on oil prices

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