Oil futures settle at their lowest in a week, as recession worries pull prices down a second day

Price action

• West Texas Intermediate crude for June delivery
  CL00,
  +0.34%

  CL.1,
  +0.34%

  CLM23,
  +0.34%
  fell $1.69, or 2.3%, to settle at at $70.87 a barrel on the New York Mercantile Exchange.

• July Brent crude
  BRN00,
  +0.27%

  BRNN23,
  +0.27%,
  the global benchmark, lost $1.43, or 1.9%, at $74.98 on ICE Futures Europe. Brent, as well as WTI crude marked the lowest front-month settlements since May 4, according to Dow Jones Market Data.

• Back on Nymex, June gasoline
  RBM23,
  +0.35%
  fell 1.5% to $2.46 a gallon, while June heating oil
  HOM23,
  +0.38%
  declined by 1.8% at $2.35 a gallon.

• June natural gas
  NGM23,
  +2.56%
  settled little changed at $2.19 per million British thermal units, down less than 0.1% for the session.

Market drivers

There are “multiple notable influences” on the oil market right now, including, the U.S. debt ceiling drama, simmering regional bank worries, and inflation expectations driving a still-aggressive Federal Reserve policy outlook, which will ultimately result in a potentially deep economic recession, which would crush demand, analysts at Sevens Report Research wrote in Thursday’s newsletter.

“Those factors will continue to influence oil prices and refined products in the near term as debt ceiling woes, bank fears, and the threat of recession will all put pressure on the energy complex, while improvement in any [or] all will provide the market with a tailwind and relief rally,” they said.

WTI snapped a three-day winning streak on Wednesday, and Brent broke a four-day string of wins on Wednesday, after the Energy Information Administration said U.S. commercial crude inventories rose by 3 million barrels for the week ending May 5. On average, analysts had forecast a decline of 1.8 million barrels, according to a survey by S&P Global Commodity Insights.

Product numbers, however, were more supportive, with gasoline and distillate fuel oil inventories falling by 3.2 million and 4.2 million, respectively.

Implied demand was stronger over the week, driven by gasoline, which increased by 685,000 barrels a day, bringing the four-week rolling average gasoline demand just short of 9 million barrels a day, wrote analysts at ING, in a note.

In terms of oil prices, analysts at Sevens Report Research said they “maintain the view that WTI prices are in a broad trading range with support near $67 and resistance near $83, leaving the $75 area as a key, magnetic pivot point that prices are likely to oscillate around.”

In a monthly report issued Thursday, the Organization of the Petroleum Exporting Countries left its outlook for growth in world oil demand unchanged at 2.3 million barrels a day, with a small rise for China offset by slight declines for other regions. It expected total world oil demand of 101.9 million barrels a day in 2023, though also said the forecast was “subject to many uncertainties.”

Natural-gas futures, meanwhile, ended little changed after the U.S. Energy Information Administration reported on Thursday that domestic natural-gas supplies climbed by 78 billion cubic feet for the week ended May 5. Analysts had called for a storage increase of 73 billion cubic feet on average, according to a survey conducted by S&P Global Commodity Insights.