Oil futures edged lower Wednesday, failing to hold modest gains seen after Russia cut off natural-gas deliveries to Poland and Bulgaria as investors also assess the threat to demand from China’s COVID lockdowns.
Price action
- West Texas Intermediate crude for June delivery CL.1, -0.52% CL00, -0.52% CLM22, -0.52% fell 89 cents, or 0.9%, to $ 100.81 a barrel on the New York Mercantile Exchange.
- June Brent crude BRNM22, -0.37% fell 68 cents, or 0.6%, to $ 104.41 a barrel on the ICE Futures Europe, while the most actively traded July contract BRN00, -0.33% BRNN22, -0.33% was down 47 cents, or 0.4%, at $ 104.14 a barrel.
- May natural-gas futures NGK22, +2.86% rose 1.5% to $ 6.95 per million British thermal units.
- June gasoline RBM22, +0.41% was up 0.2% at $ 3.3198 a gallon, while June heating oil HOM22, -0.60% fell 0.8% to $ 3.7866 a gallon.
Market drivers
State-controlled Russian giant Gazprom RU:GAZP said Tuesday that it had cut natural gas deliveries to Poland and Bulgaria as they refused to pay in Russian rubles, as demanded by President Vladimir Putin. Futures tracking Europe’s wholesale gas price reached a high of €119 per megawatt hour in early trading Wednesday, before paring back to €105.79, a gain of around 4%.
Read: ‘Energy is being increasingly weaponized.’ Analysts weigh up risks after Russia cuts gas to two EU countries
“A concern for the EU (European Union) market, as well as global gas markets is whether Russia will escalate further by cutting supplies to other European countries,” said Warren Patterson, head of commodities strategy at ING, in a note.
The “very real risk for even further escalation suggests that European gas prices will remain well supported,” he wrote. “This will have a spillover into other gas markets, particularly the Asian market. Europe will have to increasingly compete with Asia for flexible LNG (liquefied natural gas) supply, which will keep Asian spot LNG prices well supported.”
Oil rebounded Tuesday, with the move tied in part to an announcement by the People’s Bank of China promising monetary-policy support for small businesses and industries hit hardest by COVID-19. Worries over crude demand continue though as Beijing moved to rapidly test residents. Fears of a lockdown of China’s capital had weighed on crude prices.
U.S. supply data will also be in focus Wednesday.
The American Petroleum Institute on Tuesday afternoon reported that U.S. crude-oil inventories rose by 4.78 million barrels last week, according to a source who cited the data. U.S. gasoline supplies, meanwhile, were seen down 3.91 million, according to the source, while distillates were up 431,000 barrels.
Official inventories data from the Energy Information Administration is due Wednesday morning. Analysts surveyed by The Wall Street Journal forecast the EIA data to show crude inventories up by 600,000 barrels, while gasoline supplies were seen up 100,000 barrels and distillate stocks down 100,000 barrels.