U.S. oil futures head for a sixth straight decline on fears of a recession

Price motion

• West Texas Intermediate crude for April supply
  CL.1,
  -2.54%

  CL00,
  -2.54%

  CLJ23,
  -2.54%
  fell $1.46, or 1.9%, to $74.90 a barrel on the New York Mercantile Exchange with costs headed for a sixth loss in a row. That can be the longest streak of losses for a front-month contract since early December, FactSet information present.

• April Brent crude
  BRNJ23,
  -2.34%,
  the worldwide benchmark, was down $1.57, or 1.9%, to $81.48 a barrel on ICE Futures Europe. May Brent
  BRN00,
  -2.17%

  BRNK23,
  -2.17%,
  probably the most actively traded contract, was off $1.37, or 1.7%, at $81.40 a barrel.

• Back on Nymex, March gasoline
  RBH23,
  -3.19%
  fell 2.5% to $2.356 a gallon, whereas March heating oil
  HOH23,
  -2.00%
  ticked down 1.1% to $2.7613 a gallon.
• March pure fuel
  NGH23,
  +5.93%
  rose 5.6% to $2.189 per million British thermal items after dropping 8.9% on Tuesday to settle on the lowest since September 2020.

Market drivers

“The oil market still has a recession obsession,” stated Phil Flynn, senior market analyst at The Price Futures Group. “Oil prices were under pressure as rate fears are raising larger concerns of oil demand destruction.”

However, there are indicators that present “just the opposite,” he stated. Not solely did the Joint Organisations Data Initiative on Tuesday say that international oil demand hit an all-time excessive in December, however no less than one Fed official stated the market is just too pessimistic on the outlook for the financial system, stated Flynn.

St. Louis Fed President James Bullard on Wednesday informed CNBC in an interview that the markets have “overpriced a recession in the first half of 2023 and maybe they are overpricing the chances of a recession in the second half of 2023.”

“If that is the case, then oil is very underpriced,” Flynn. stated. 

Still, oil futures have struggled in February as Treasury yields have risen on expectations the Fed might want to hike charges greater than beforehand anticipated to rein in inflation. Rising yields additionally present a elevate for the U.S. greenback, which makes commodities priced within the unit costlier to holders of different currencies.

Oil fell Tuesday alongside a rout in U.S. shares, which noticed the Dow Jones Industrial Average
DJIA,
+0.12%
wipe out 2023 good points as main indexes suffered their worst day of 2023.

Investors on Wednesday awaited the two p.m. Eastern launch of minutes of the Fed’s Jan. 31-Feb. 1 coverage assembly for clues to the scale and scope of future charge will increase.

“Markets continue to come to terms with expectations of a more hawkish Fed, following a raft of economic data suggesting the Fed still has quite a bit of work to do,” stated Warren Patterson and Ewa Manthey, commodity strategists at ING, in a word.

“These headwinds, combined with a fairly comfortable oil balance, mean that the oil market will likely remain rangebound. However, we see the market breaking out of this range later in the year as the oil market significantly tightens,” they wrote.

Weekly U.S. petroleum provide information from the Energy Information Administration will likely be launched on Thursday, a day later than regular attributable to Monday’s Presidents Day vacation.

Estimates from Robert Yawger, director of vitality futures at Mizuho Securities U.S.A., confirmed expectations for provide good points for the week ended Feb. 17 of three million barrels for U.S. crude, 2 million barrels for gasoline and 1 million barrels for distillates.

Last week, the EIA reported a 16.3 million-barrel rise in crude shares for the week ended Feb. 10. The information included an upward adjustment to provides.