Oil gains on hopes for better demand as worries over wider Middle East conflict linger

By Myra P. Saefong and William Watts

Market shakes off Wednesday data showing a weekly fall in U.S. gasoline demand

Oil futures settled higher on Thursday, building on price gains for the month so far, as traders hoped for a rebound in U.S. summer gasoline demand, despite data showing a slowdown in consumption of the fuel at the pump last week.

Traders also kept an eye on tensions in the Middle East that could threaten crude supplies from the region.

Price moves

West Texas Intermediate crude CL00 for August delivery CL.1 CLQ24 rose 84 cents, or 1%, to settle at $81.74 a barrel on the New York Mercantile Exchange.August Brent crude BRNQ24, the global benchmark, added $1.14, or 1.3%, at $86.39 a barrel on ICE Futures Europe, ahead of the contract's expiration Friday. More actively traded September Brent BRN00 BRNU24 rose 79 cents, or 0.9%, to $85.26 a barrel.July gasoline RBN24 added less than 0.1% to $2.55 a gallon, while July heating oil HON24 climbed 0.4% to $2.55 a gallon. The July contracts expire at the end of Friday's session.Natural gas for August delivery NGQ24 settled at $2.69 per million British thermal units, down 2.2%.

Market drivers

Oil prices on Thursday were headed for their first monthly gain since March but remain "trapped within a range," said Lukman Otunuga, manager for market analysis at FXTM.

"Bulls have been supported by geopolitical tensions and hopes for a rebound in demand thanks to the summer driving season," he told MarketWatch.

In the Middle East, exchanges between Israel and Iran-backed Hezbollah fighters over the Lebanon border could intensify - potentially spilling over into a wider conflict capable of threatening crude supplies from the oil-rich region.

Also read: Biden walks 'fine line' fighting climate change while fueling record oil output

In the U.S., concerns over gasoline demand continue, even with the summer driving season, which runs from Memorial Day to Labor Day, fully under way.

There was evidence of that "potential slowdown in demand at the pump" in the Energy Information Administration's report released Wednesday, said Tyler Richey, co-editor at Sevens Report Research. The implied measure of U.S. consumer demand, gasoline supplied, dropped to a one-month low of 8.969 million barrels per day for the week that ended June 21, he said. That compares with 9.386 million bpd a week earlier.

"The main takeaway is that the unforeseen strength in consumer demand that powered oil futures to multi-month highs in June began to show signs of easing back below trend last week," Richey said in Thursday's newsletter.

The EIA also reported that gasoline stockpiles rose 2.7 million barrels in the latest week, while commercial crude inventories climbed by 3.6 million barrels.

Overall, the oil market is "waiting for the next fundamental catalyst to trigger a significant move in either direction," said Otunuga. "This could come in the form of the incoming [personal consumption expenditures] data on Friday, which may set the tone for oil as we enter the second half of 2024."

He added: "Should the incoming inflation data boost bets around lower U.S. interest rates, this could provide further support to oil prices."

Meanwhile, natural-gas futures ended lower Thursday but remained on track to post a quarterly gain of more than 50%.

The EIA reported Thursday that U.S. natural-gas supplies in storage climbed by 52 billion cubic feet for the week that ended June 21. That nearly matched the average 51 bcf increase forecast by analysts surveyed by the Wall Street Journal.

-Myra P. Saefong -William Watts

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06-27-24 1515ET

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