Oil futures lost ground Thursday, pulling back from three-month highs set earlier in June as recession worries rise.
July natural gas
shed 2.2% to $6.709 per million British thermal units.
Crude prices have lost ground since trading at three-month highs early last week, with analysts tying the decline in part to worries that aggressive efforts by the Federal Reserve and other central banks to rein in inflation could sharply slow the economy, undercutting demand.
Federal Reserve Chair Jerome Powell, in testimony before the U.S. Senate Banking Committee on Wednesday, argued that the U.S. economy was robust enough to handle the Fed’s tightening efforts, but acknowledged that achieving a so-called soft landing would be a challenge.
Crude prices sank Wednesday as Powell “pointed at a possible recession,” said Ipek Ozkardeskaya, senior market analyst a Swissquote Bank, in a note.
“The next important test for the oil bears is the $100 level. Many investors don’t expect a downturn in oil prices below this level, pointing at a tight global supply, and the resilient demand,” the analyst said.
President Joe Biden on Wednesday called for a three-month holiday on federal gas and diesel taxes and urged states to also temporarily drop fuel taxes. Analysts were skeptical the proposal would win approval, but noted that if enacted would work to boost demand and could prolong high prices.
The American Petroleum Institute reported late Wednesday that U.S. crude supplies rose by 5.6 million barrels for the week ended June 17, according to sources. The API, which released its data a day later than usual because of Monday’s Juneteenth holiday, also reportedly showed a weekly inventory climb of 1.2 million barrels for gasoline, while distillate stockpiles fell by nearly 1.7 million barrels.
Oil stocks at the Cushing, Okla., delivery hub were down by 390,000 barrels last week, sources said.
Inventory data from the Energy Information Administration were scheduled for Thursday, but the EIA said late Wednesday that data this week will be delayed due to “systems issues.” The government agency says it will release delayed data as soon as possible.
On average, analysts polled by S&P Global Commodity Insights said the EIA is expected to show crude inventories down by 3.7 million barrels for the week, along with supply increases of 500,000 barrels for gasoline and 600,000 barrels for distillates.