Oil prices end lower; natural-gas futures climb nearly 10%

Price action

• West Texas Intermediate crude for June delivery
  CL00,
  +0.29%

  CL.1,
  +0.17%

  CLM23,
  +0.17%
  fell 97 cents, or 1.3%, to settle at $71.86 a barrel on the New York Mercantile Exchange following a gain of 2.8% Wednesday.

• July Brent crude
  BRN00,
  +0.01%

  BRNN23,
  +0.01%,
  the global benchmark, $1.10, or 1.4%, at $75.86 a barrel on ICE Futures Europe.

• Back on Nymex, June gasoline
  RBM23,
  +0.15%
  edged down by less than 0.1% to $2.57 a gallon, while June heating oil
  HOM23,
  +0.19%
  shed 0.8% to $2.40 a gallon.

• June natural gas
  NGM23,
  +0.31%
  gained 9.6% to $2.59 per million British thermal units, with front-month prices settling at their highest since March 13, according to Dow Jones Market Data.

Oil market drivers

Oil traders on Thursday showed a “more cautious approach, particularly with regards to the outcome of the debt ceiling negotiations,” following gains for oil prices on Wednesday, said Ricardo Evangelista, senior analyst at ActivTrades,

Crude-oil futures had found support Wednesday after upbeat comments by President Joe Biden and House Speaker Kevin McCarthy on talks toward lifting the U.S. debt ceiling and averting a potentially catastrophic default by the federal government.

See: ‘Doomsday machine’: Here’s what could happen if the debt ceiling is breached

Talks have yet to produce a breakthrough, however. “Despite the recent positive vibes from leading figures on both sides, nothing has yet been agreed, with the doom scenario of no deal still hanging over the U.S. and global economies,” said Evangelista, in markets commentary.

The House of Representatives could vote on a debt-ceiling deal as soon as next week, Speaker Kevin McCarthy said on Thursday. The California Republican said he thinks an eventual bill to raise the borrowing limit needs to be on the House floor next week, and that he can “see the path,” according to a Punchbowl News reporter’s tweet.

Need to Know: Debt ceiling is a buy-the-rumor but sell-the-news event, cautions this strategist

It’s become apparent in recent months that trends in the price of crude oil are being driven “more by concerns about demand rather than concerns about supply in the marketplace,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.

“In recent days, concerns about banks have been replaced by concerns about the debt ceiling,” he said. “Just as progress toward a deal to avoid a U.S. debt default has shored up support for equities, it appears to be providing some support to crude oil as well.”

Natural-gas price rally

Natural-gas futures, meanwhile finished sharply higher Thursday after the U.S. Energy Information Administration reported a smaller-than-expected weekly rise in domestic natural-gas supplies.

Inventories of the fuel in storage climbed by 99 billion cubic feet for the week ended May 12, the EIA said. Analysts called for a storage increase of 106 billion cubic feet on average, according to a survey conducted by S&P Global Commodity Insights.

“This might be called the ‘white flag’ natural gas report as it signals a surrender and retreat from U.S. gas producers, but also it reflects shut production from the Alberta [Canada] wildfires,” said Phil Flynn, senior market analyst at The Price Futures Group.

Baker Hughes
BKR,
-0.04%
reported on May 12that the number of active U.S. rigs drilling for natural gas saw a weekly drop of 16 to 141 rigs, implying a slowdown in future natural-gas production.