Global oil prices fall for fourth straight session, with demand and Middle East risks in focus

By Myra P. Saefong and Joseph Adinolfi

Natural-gas futures buck the trend in energy to finish higher

Oil futures ended on a mixed note Thursday, with U.S. prices modestly higher as global benchmark prices declined for a fourth straight session to mark another settlement at their lowest in three weeks.

Traders digested news that the U.S. will reinstate sanctions on Venezuela - and continued to watch developments in the Middle East following Iran's attack on Israel - to gauge risks to global oil supplies. They've also turned their attention to signs of weakness in oil demand.

Price action

West Texas Intermediate crude for May delivery CL.1 CL00 CLK24 rose by 4 cents, or nearly 0.1%, to settle at $82.73 a barrel after a three-session decline. It settled Wednesday at its lowest since March 27.June Brent crude BRN00 BRNM24, the international benchmark, shed 18 cents, or 0.2%, to $87.11 a barrel, ending Thursday at the lowest since March 27.May gasoline RBK24 lost 0.6% to $2.71 a gallon, while May heating oil HOK24 shed 1.6% to $2.53 a gallon.Natural gas for May delivery NGK24 gained 2.6% to $1.76 per million British thermal units.

Market drivers

Fundamental influences are "conflicted" right now, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

"Higher-for-longer central bank policy expectations, a strengthening dollar, and subsequent worries about the sustainability of economic growth in a high-rate/strong-dollar environment, are acting as headwinds on global oil prices," he said, while "simmering geopolitical situation between Israel and Iran is simultaneously keeping a fear-bid in the market."

Crude-oil prices are on track to post a decline for a second-straight week amid signs that demand isn't growing as quickly as experts had expected.

"The threat of intensifying direct hostilities between Israel and Iran has been shrugged off by traders, although this should continue to put a floor under prices. Instead, the focus is on renewed concerns for demand growth for the rest of this year, and beyond," David Morrison, senior market analyst at Trade Nation, said in emailed commentary.

Supply data released on Wednesday by the Energy Information Administration showed inventories climbed for a fourth straight week through Friday.

JPMorgan Chase & Co.'s high-frequency demand indicator estimated that worldwide oil consumption so far in April has been less than initially projected, averaging 101 million barrels per day, roughly 200,000 barrels per day below their published estimates.

On a year-over-year basis, demand growth in April was on track for 1.46 million barrels per day, lower than JPM's expectations for a 1.7 million barrels per day increase.

Still, Sevens Report's Richey said that he believes oil prices will end the week higher than current levels unless there's a notable de-escalation in the Israel-Iran conflict.

"The possibility of a devastating attack by Israel against Iran, potentially on their oil infrastructure this coming weekend is too big a threat for traders to go home with short positions" on Friday, he said. The "active month contract roll" is also underway, said Richey, with the May WTI contract expiring at the end of Monday's session.

He said he expects to see a "short-covering rally by oil bears that came into this week with the opinion that Israel would practice restraint and not retaliate after Iran's direct attack last weekend."

Traders will also look for any impact from the U.S. Department of State's announcement Wednesday that it was letting the U.S. government's temporary sanctions-relief waiver, which authorized transactions related to the oil and gas sector operations in Venezuela, expire, but issued a 45-day "wind-down license" to allow for an orderly transition in the oil and gas market.

The U.S. had temporarily lifted sanctions, in part to get free elections in Venezuela but also because it feared the loss of Russian oil due to sanctions, said Phil Flynn, senior market analyst at The Price Futures Group.

The move to allow the waiver to expire could be a "precursor" to a possible release of oil from the U.S. Strategic Petroleum Reserve using the conflict as a potential reason for a release to give the U.S. "cover" as gasoline prices start to edge back up, said Flynn.

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Natural-gas futures, meanwhile, ended higher, recouping Wednesday's loss and then some.

The Energy Information Administration Thursday revealed a weekly increase of 50 billion cubic feet in domestic supplies for the week ended April 12. On average, analysts forecast a climb of 44 billion cubic feet, according to S&P Global Commodity Insights.

-Myra P. Saefong -Joseph Adinolfi

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04-18-24 1503ET

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