Oil prices post back-to-back losses with consolidation ‘warranted’ after a recent rise to the year’s highs

Price action

• West Texas Intermediate crude
  CL00,
  +0.78%

  CLV23
  for October delivery fell 92 cents, or 1%, to settle at $90.28 per barrel on the New York Mercantile Exchange on the contract’s expiration day. The new front month November contract
  CLX23,
  +0.78%
  settled at $89.66, down 82 cents, or 0.9%.

• November Brent crude
  BRN00,
  +0.51%

  BRNX23,
  +0.60%,
  the global benchmark for oil prices, shed 81 cents, or 0.9%, to $93.54 per barrel on ICE Futures Europe.

• October gasoline 
  RBV23,
  -1.89%
  lost 1.5% to $2.62 a gallon, while October heating oil
  HOV23,
  -0.80%
  fell by 1.4% to $3.33 a gallon.

• October natural gas
  NGV23,
  +1.49%
  fell 4% to $2.73 per million British thermal units after tacking on 4.4% on Tuesday.

Other market drivers

“We do feel some consolidation is warranted until we see the next leg higher,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch.

Still, “the weight of the continued supply production cut through the end of the year by Saudi Arabia and Russia…is not a matter of if, but a matter of when prices will break $100,” he said.

Zahir also said that the “one cure for oil prices going higher is higher oil prices to tamper down demand.” That may not happen “until we get above $100 a barrel.”

Oil prices lost more ground in the wake of Wednesday’s decision by the Federal Reserve to leave its benchmark rate in a range of 5.25% to 5.5%. The central bank, however, signaled another 25 basis point rate hike this year.

See: Consumers take notice as inflation bites and oil prices top $90 a barrel

In comments during a press conference, Fed Chairman Jerome Powell said one more rate hike this year won’t have a huge significance for the economy.

Worries that the Fed will do too much to stave off inflation have fed concerns over the potential for an economic recession, which could lead to lower demand for oil.

Read: Could rising oil prices tip the U.S. into a recession? Here’s why investors are nowhere near having to worry about it

Also see: Lithium supply may tighten in the years ahead, driving prices higher along with it

Supply data

On Wednesday, the Energy Information Administration reported that U.S. commercial crude inventories fell by 2.1 million barrels for the week ended Sept. 15.

Strategists at Macquarie had forecast a 700,000-barrel weekly decline. The late Tuesday, American Petroleum Institute, a trade group, reported a 5.25 million-barrel weekly decline, according to news reports.

The EIA report also revealed supply declines of 800,000 barrels for gasoline and 2.9 million barrels for distillates. Macquarie strategists had forecast weekly inventory declines of 2.9 barrels for gasoline and 1.6 million barrels for distillates.

Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 2.1 million barrels for the week, the EIA said, while oil stocks in the Strategic Petroleum Reserve edged up by 600,000 barrels.

The fall in commercial crude stocks “offset” the addition to the SPR, said Robbie Fraser, manager, global research & analytics, at Schneider Electric, in a daily note.

“When combined with changes to refined products, though, overall inventories posted a net build of 3 million barrels, likely in part due to a seasonal reduction in demand,” he said. “Domestic production, meanwhile, held flat on the week, falling just short of 13 [million barrels per day], which remains within reach over the next few weeks.”