Oil prices end lower on weak U.S. gasoline demand

By Myra P. Saefong and Isabel Wang

Natural-gas futures drop by nearly 9% on oversupplied market

Oil prices settled lower on Wednesday, with pressure from U.S. data showing a drop in weekly demand for gasoline outweighing support from the first drop in commercial crude supplies in five weeks.

Crude prices also declined as traders continued to monitor developments in the Middle East for any potential impacts on global oil supplies.

Price action

West Texas Intermediate crude for June delivery CL.1 CL00 CLM24 declined by 55 cents, or 0.7%, to settle at $82.81 on the New York Mercantile Exchange. It had briefly moved up toward session highs near $84 in the immediate wake of the supply-data release Wednesday morning.June Brent crude BRN00 BRNM24, the global benchmark, shed 40 cents, or nearly 0.5%, to $88.02 a barrel. May gasoline RBK24 settled at $2.73 a gallon, up 0.3%, while May heating oil HOK24 fell 1.1%, to $2.55 a gallon.Natural gas for May NGK24 lost 8.8% to end at $1.65 per million British thermal units ahead of weekly supply data due out Thursday.

Supply-and-demand data

The most notable takeaway from the Energy Information Administration report Wednesday was the weekly implied measure of consumer demand for fuel at the pump, gasoline supplied, which dropped to the lowest level since mid-February, said Tyler Richey, co-editor at Sevens Report Research.

That indicated a "steady and relatively quick pullback" in domestic fuel consumption in recent weeks," he told MarketWatch.

U.S. gasoline supplied for the week ended April 19 fell by 239,000 barrels a day to 8.4 million bpd.

And that was "not a 'one-off' either, as the 4-week moving average of the often volatile gasoline supplied data fell for a third consecutive week to the lowest reading since the week of March 8th," said Richey. The EIA data showed the four-week average for gasoline supplied, as of last week, down 3.7 million bpd at 8.7 million bpd.

"Those disappointing implied consumer demand figures paired with the smaller than expected gasoline supply draw on the headline poured some cold water on the market...as worries of a persistently tight physical fuel market are beginning to subside," said Richey.

The EIA showed a weekly supply decline of 600,000 barrels for gasoline, but distillate stockpiles rose by 1.6 million barrels for the week ended April 19. An S&P Global Commodity Insights survey of analysts called for inventory decreases of 1.1 million barrels for gasoline and 84,000 barrels for distillates.

U.S. commercial crude inventories, meanwhile, dropped by 6.4 million barrels last week, the EIA reported.

On average, analysts forecast a crude supply decrease of 2.1 million barrels, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, the American Petroleum Institute reported a crude inventory fall of 3.2 million barrels, according to a source citing the data.

The draw in crude inventories "primarily reflects a rebound in exports, with export volumes jumping half a million barrels per day from the prior week," said Troy Vincent, senior market analyst at DTN.

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 fell by 600,000 barrels to 32.4 million barrels.

The fall in domestic crude stockpiles comes "on the heels of Chinese refiners passing their peak maintenance season," Vincent told MarketWatch.

"A wave of vessels destined for the U.S. Gulf Coast to load U.S. crude and head to Asia has begun and should continue to pressure U.S. crude stocks in the coming weeks as exports pick up pace alongside domestic refinery runs," he said. This should help support prices, he said.

Oil moves

On Tuesday, Brent and WTI crude both settled at their highest prices in a week amid lingering uncertainty over U.S. sanctions against Iran.

"Geopolitical tensions are still simmering in the Middle East," said Richey. Another bounce in prices into the weekend "would not be suspiring as oil bears will be hesitant to go home with short positions with the threat of escalating tensions between Israel and Iran (or Iran's proxy groups) being very real."

Price drop for natural gas

In the U.S., prices for natural gas finished nearly 9% lower Wednesday as the domestic market continued to deal with an oversupply.

Mixed weather in the "shoulder season" - the period after winter but before the summer, is "forecasted to maintain the [supply] surplus, with recent weather data indicating light demand for natural gas," said Victoria Dircksen, commodity analyst at Schneider Electric.

The EIA on Thursday will release its weekly U.S. natural-gas supply report. On average, analysts polled by S&P Global Commodity Insights expect the data to show an increase of 79 billion cubic feet for last week, compared to a five-year average stock increase of 59 billion.

-Myra P. Saefong -Isabel Wang

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04-24-24 1513ET

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