Oil prices ends lower as weekly U.S. crude supplies rise by over 7 million barrels

By Myra P. Saefong and William Watts

WTI, Brent oil prices settle at lowest since March 12

Oil futures fell for a third straight session on Wednesday, settling at their lowest level since mid-March, after official U.S. data revealed an unexpected weekly rise of more than 7 million barrels in domestic crude inventories.

Traders also continued to monitor negotiations for a cease-fire between Israel and Hamas. Those negotiations have, for now, eased concerns over potential disruptions to the flow of oil in the region.

Price moves

West Texas Intermediate crude CL00 for June delivery CL.1 CLM24 fell $2.93, or 3.6%, to $79 a barrel on the New York Mercantile Exchange. Prices logged a monthly loss of 1.5% in April.July Brent crude BRN00 BRNN24, the global benchmark, declined $2.89, or 3.4%, to $83.44 a barrel on ICE Futures Europe, after rising 0.4% in April. Front-month Brent and WTI oil settled at their lowest levels since March 12, according to Dow Jones Market Data.June gasoline RBM24 shed 4.2% to $2.58 a gallon, while June heating oil HOM24 lost 3% to $2.45 a gallon.Natural gas for June delivery NGM24 settled at $1.93 per million British thermal units, down 3%, after posting a gain of 12.9% for the month of April.

Supply data

U.S. commercial crude inventories marked their largest weekly rise since February, with the Energy Information Administration on Wednesday reporting a climb of 7.3 million barrels for the week that ended April 26.

On average, analysts forecast a crude-supply decrease of 2.5 million barrels, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, the American Petroleum Institute reported a crude-inventory gain of 4.9 million barrels, according to a source citing the data.

The EIA report also showed a weekly supply increase of 300,000 barrels for gasoline, while distillate stockpiles edged down by 700,000 barrels. The S&P Global Commodity Insights survey called for inventory decreases of 700,000 barrels for gasoline and 10,000 barrels for distillates.

"Potential supply-side support" came from an uptick in the implied measure of consumer gasoline demand, as gasoline supplied rose 195,000 barrels a day from a two-month low to 8.6 million bpd last week, said Tyler Richey, co-editor at Sevens Report Research.

However, even that statistic "lacked conviction" as the 4-week average extended a recent decline," he told MarketWatch. The four-week average fell 317,000 bpd to 8.58 million bpd, the EIA reported.

That suggests "consumer fuel demand is continuing to deteriorate," said Richey.

U.S. oil production was unchanged at 13.1 million barrels per day in the latest week, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub rose by 1.1 million barrels to 33.5 million barrels.

Other market drivers

Recent weakness in oil has really come due to the potential for a cease-fire between Israel and Hamas, but "we have been here before," said Tariq Zahir, managing member, at Tyche Capital Advisors.

Israel was ready to send a delegation to Cairo to join negotiations aimed at halting fighting in Gaza, the Wall Street Journal reported, although Israeli Prime Minister Benjamin Netanyahu has pledged to push ahead with plans to invade the southern Gaza city of Rafah.

"If it wasn't for the simmering threat the geopolitical tensions in the Middle East pose to global oil supply, I think it is safe to say that WTI would be trading in the $60s, low $70s at best, due to recession risks and previously resilient but more recently stumbling global growth metrics," said Richey.

Meanwhile, the Federal Reserve on Wednesday left a key short-term interest rate at a 23-year high, noting that "in recent months, there has been a lack of further progress toward the committee's 2% inflation objective.

MarketWatch live blog: Fed keeps interest rates at 23-year high, cites lack of progress on inflation

During a press release, Fed Chairman Jerome Powell said it's probably going to take longer for inflation to slow to the point that interest-rates cuts would be justified.

A higher-for-longer Fed policy rate outlook would be "bad for economic growth prospects and the rising threat of an recession would be crippling to [oil] demand dynamics," said Richey, ahead of the Fed policy statement.

-Myra P. Saefong -William Watts

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-01-24 1522ET

Copyright (c) 2024 Dow Jones & Company, Inc.