US oil prices end lower, but Brent oil gains after consecutive losses

Oil futures ended on a mixed note on Tuesday, with US prices reaching their lowest in more than a week, but global benchmark crude posting a gain after consecutive declines.

Oil has found support after comments by US House Majority Leader Steny Hoyer lowered expectations that the US will mine the Strategic Oil Reserve to help lower oil prices. ‘gasoline.

However, the International Energy Agency has said it expects the growth in crude oil production to help reduce tight global supplies, putting some pressure on prices.

“The market now thinks that the United States is less likely to use the [SPR] is a band-aid for higher gasoline prices, ”Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.

The raw materials corner: Why operating the SPR is one of the many “bad” options for reducing gasoline prices

Hoyer told reporters he disagreed with Senate Majority Leader Chuck Schumer’s recent call to exploit the SPR to cut gasoline prices, Reuters reported on Tuesday.

Separately, Stephen Nalley, the acting administrator of the Energy Information Administration, said during a Hearing of the Senate Committee on National and International Energy Price Trends that the impact of a rejection of the SPR would be “short-lived”.

“Apparently, common sense can set in as everyone knows that using SPR to try and bring down gasoline prices will only be a short-term band-aid and will not solve the underlying problem. “said Flynn.

“Apparently, common sense can set in as everyone knows that using SPR to try and bring down gasoline prices will only be a short-term band-aid and will not solve the underlying problem. . “

– Phil Flynn, The Price Futures Group

Crude West Texas Intermediate for delivery in December CL00,
+ 0.05%

fell 12 cents, or nearly 0.2%, to $ 80.76 a barrel on the New York Mercantile Exchange, the lowest first-month contract end since Nov. 4, according to Dow Jones Market Data.

January Brent gross BRN00,
+ 0.22%

the global benchmark, rose 38 cents, or 0.5%, to $ 82.43 a barrel on ICE Futures Europe.

Prices for both contracts had traded lower early on Tuesday, with WTI prices bottoming at $ 80.03 amid signs of a recovery in global crude supplies.

In monthly reports, the Organization of the Petroleum Exporting Countries and the IEA “said world oil markets could run into surplus before the end of the year, with the former citing a fragile recovery in demand due to the pandemic underway, while the second pointed to a recent trend of strong production gains, especially outside the United States, ”said Christin Redmond, commodities analyst at Schneider Electric, in a daily note.

“US offshore production has seen a strong recovery from the impacts of Hurricane Ida, while production in the Permian region has registered strong gains over the past two months,” she said, adding that the US government expects Permian oil production to hit a record high. in December.

In a monthly report released on Monday, EIA forecast a 67,000 barrels per day increase in oil production in the Permian region to 4.95 million barrels per day in December.

The IEA, in its monthly report released on Tuesday, said the tight supply and demand balance in the global oil market could ease. The IEA said it expects production to increase by 1.5 million barrels per day by 2021, with the United States, Saudi Arabia and Russia accounting for about half of that amount. .

Flynn said the IEA “is really counting on US power producers to fill the void,” but may be “overly optimistic about where we will be next year, especially with new regulations emanating from the Biden administration ”.

In a monthly report last week, OPEC slashed its growth outlook this year, citing the effect of high prices.

Traders have also observed developments related to Iran. The Wall Street Journal reported on Tuesday that Iran has resumed production of advanced part equipment for its nuclear program, reducing the likelihood of it reaching a deal with world powers to revive the 2015 nuclear deal to curb its nuclear projects.

Meanwhile, data showing a better-than-expected US retail sales figure “has given the Federal Reserve a little more leeway” when it comes to reducing asset purchases and ‘raise interest rates, said Flynn.

On top of that, St. Louis Fed Chairman James Bullard suggested on Tuesday that the Fed should hike interest rates twice next year and speed up its reduction in bond purchases. The comments pushed oil prices down early on Tuesday, Flynn said.

Meanwhile, natural gas futures contracts from December NGZ21
jumped 3.2% to $ 5.177 per million British thermal units, following a rise in European prices after German regulators suspended the certification process for the Nord Stream 2 pipeline that would transport natural gas from Russia to the ‘Germany.

In other energy stocks Nymex, December essence RBZ21
added 0.9% to $ 2.35 per gallon and December heating oil HOZ21
rose 1.4% to $ 2.431 per gallon.

The EIA will release its weekly US oil supply data on Wednesday.

On average for the week ended November 12, analysts expect the EIA to report a drop in inventories of 2.5 million barrels of crude oil, 100,000 barrels of gasoline and 1.3 million barrels of distillates, according to a survey by S&P Global Platts.

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Felix J. Dixon