Futures Movers: Oil extends declines, with U.S. benchmark dropping below the key $70 level

Futures Movers: Oil extends declines, with U.S. benchmark dropping below the key $70 level


Markets/commodities reporter

Oil prices on Thursday looked set to extend their sharp losses from a day earlier, after a monthly report from the International Energy Agency hinted at a slowdown in crude demand and revealed an uptick in global supplies.

Traders also looked to the resumption of Libyan oil exports and mulled the impact of the U.S.-China trade dispute on the global economy, and oil demand.

August West Texas Intermediate crude CLQ8, -0.81% the U.S. benchmark, was down $1.04, or 1.5%, to $69.34 a barrel on the New York Mercantile Exchange. Prices haven’t ended a session below the $70 mark since June 25. The contract posted a drop of 5% Wednesday.

September Brent crude LCOU8, +0.22% shed 4 cents, or less than 0.1%, to $73.36 a barrel on the ICE Futures Europe exchange. The contract wrapped trading Wednesday down nearly 7% at $73.40 a barrel, marking its lowest settlement since June 21.

Read: The 7 reasons behind U.S. oil’s sharpest daily point drop in almost 3 years

“The fact that oil prices have depreciated sharply following news that Libya will restore its oil production continues to highlight how bulls remain heavily dependent on geopolitics to sustain the rally,” said Lukman Otunuga, research analyst at FXTM, in a Thursday note.

Oil tumbled Wednesday after Libya’s state-run National Oil Corp. lifted the force majeure on eastern oil ports that had kept the country’s crude off global markets amid continued civil war. Analysts estimated that those ports could contribute approximately 700,000 barrels of oil a day to the global market.

But some analysts now ask how long it will take for that oil to get to markets. Commerzbank said in a note that it is unclear how much damage has been sustained in the reclaimed oil ports following fighting last month.

Meanwhile, “falling production from Venezuela and Canada, coupled with looming sanctions on Iran, have provided a solid argument for oil to remain at such elevated levels,” said Otunuga. “However, speculation is in the air that Saudi Arabia will be tapping into its spare capacity of 2 million [barrels per day] to add more oil to the markets, while U.S. shale production remains as robust as ever.”

Data points to an upcoming slowdown in oil demand, with rising prices as a factor, according to a monthly report from the International Energy Agency issued Thursday. It said oil demand growth in the first half of this year will average 1.5 million barrels a day, and then fall to 1.3 million barrels a day in the second half.

The IEA also said global oil supplies rose by 370,000 barrels a day in June, mainly due to higher output from Saudi Arabia and Russia. OPEC crude production in June climbed to a four-month high of 31.87 million barrels a day.

Looking ahead, “this could be a volatile trading quarter for oil markets, as investors juggle with the various themes driving prices,” Otunuga said. “It should be kept in mind that a trade war is seen as a threat to global growth, which in turn may negatively impact demand for commodities.”

Oil’s losses on Wednesday came even as the Energy Information Administration reported Wednesday that domestic crude supplies plunged by 12.6 million barrels for the week ended July 6.

Rounding out action on Nymex, August gasoline RBQ8, -0.09% fell 0.5% to $2.050 a gallon, after its 4.6% retreat Wednesday marked the sharpest session decline since Sept. 1, 2017. August heating oil HOQ8, +0.05%  lost 0.7% to $2.0872 a gallon. The contract fell 5.5% Wednesday, the most severe one-day drop for heating oil on a percentage basis since July 13, 2016.

Natural-gas prices extended earlier losses Thursday, following broad losses in the energy market.

The EIA Thursday reported that domestic supplies of natural gas rose by 51 billion cubic feet for the week ended July 6. Market consensus had called for an increase just shy of 60 billion cubic feet, according to Schneider Electric.

August natural gas NGQ18, -1.10%  fell 3.2 cents, or 1.1%, to $2.797 per million British thermal units.

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