Oil prices ended lower on Thursday, posting their first monthly decline since November, on a market increasingly concerned about the deteriorating health of the economy, as illustrated by a new U.S. indicator.
North Sea Brent crude for August delivery gave up 1.27% to close at $114.81. Over the month of June, it lost 6.5%. As for the barrel of U.S. West Texas Intermediate (WTI), also due in August, it dropped 3.66% to 105.76 dollars. It ended the month down 7.7%.
“The easy market of the first half of the year that appealed to everyone,” with prices rising steadily and irresistibly, “has disappeared, driven by more mixed fundamentals,” commented Edward Moya of Oanda in a note.
While supply remains constrained, primarily by the war in Ukraine and the sanctions imposed on Russia, demand is showing signs of fatigue.
The PCE indicator showed Thursday that consumption barely increased in May (+0.2%) in the United States, much less than economists expected (+0.6%). Edward Moya again pointed to figures released Wednesday by the Energy Information Administration (EIA), with gasoline demand in the last two weeks below the symbolic threshold of 9 million barrels per day, below last year’s level, “despite mild weather.”
“There’s also probably some position adjustments, as it’s the end of the quarter, with profit taking,” argued Kpler’s Matt Smith. “But little has changed in substance,” he argues, anticipating sustained demand for refined products, particularly gasoline.
In the United States, prices at the pump continue to fall, posting a 3% decline since the historic peak in mid-June, although much less than that of crude oil.
Traders were not responsive to the announcement by the Organization of the Petroleum Exporting Countries (Opec) and its allies in the Opec+ agreement who decided on Thursday to raise their overall production by 648,000 barrels per day in August as expected.
They did not, however, make any commitments for the future. The market was hoping for clarification after several cartel officials acknowledged that the remaining spare capacity was very modest. “It was a non-event,” according to Matt Smith.
In the United States, the price of natural gas floundered again on Thursday, falling back to its level of three months ago. Since its peak in early June, it has erased 43% of its value. This movement was mainly due to the closure of the Freeport gas terminal in Texas, which deprived the United States of around 15% of its export capacity and flooded the American market with additional gas volumes.
The EIA reported that U.S. natural gas inventories jumped by 2.3 million cubic meters, the highest level in nearly six months.