Natural gas sinks following bigger-than-expected U.S. supply buildup
By Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell back Thursday, with concerns over global oil demand stealing the spotlight away from a surprise interest-rate cut in China that had fueled a rally earlier in the session.
Crude for July delivery CLN2 +0.13% shed 34 cents, or 0.4%, to trade at $84.68 a barrel on the New York Mercantile Exchange, a big reversal after having traded as high as $87.03. Prices gained 0.9% on Wednesday.
“Overshadowing the oil market on a global scale is the perception that right now, worldwide we have more oil available than is needed,” said Charles Perry, chief executive officer at energy consulting firm Perry Management. “So these price movements are probably just ups and downs in an overall distressed market.”
Capturing financial markets off guard, the People’s Bank of China cut benchmark lending and deposit rates by a quarter of a percentage point, with the move set to take effect Friday. Read more on the China rate cut.
Crude prices found support after news of the rate cut in the No. 2 global economy, but the size of the gain came as a bit disappointing, said Tom Essaye, editor of the 7:00’s Report, a daily commentary on equity and commodity markets and the economy.
“The fundamentals in crude remain somewhat bearish — a slowing global (and domestic) economy, a well-supplied market, and a reduction in geopolitical risk premiums,” he said. ”We’ve seen a decent bound in crude over the past few days, but it looks to be running out of steam here.”
In testimony to Congress Thursday, Federal Reserve Chairman Ben Bernanke said the U.S. central bank stands ready to act to protect the financial system and the economy in the event that financial stresses from the European crisis escalate. However, investors reacted as he didn’t appear to offer any hint of what the Federal Open Market Committee might do at its next policy meeting.
“As far as what the Fed does, I do not think it will impact the oil market in the U.S.,” said Perry. “Our use is down, and I think an economic recovery will be necessary to see it improve.”
In his discussion of the domestic economy, Bernanke stuck to his April forecast that growth will continue at a moderate pace. Read more on Bernanke.
Global stock markets rose, with the Dow Jones Industrial Average DJIA +0.79% up more than 70 points following news of China’s cut in interest rates, which served to further hope for additional moves by global central banks including the Fed.
With all those factors in the backdrop, prices for the petroleum products traded in a narrow range. July gasoline RBN2 -0.16% shed 1 cent, or 0.4%, to $2.68 a gallon, while July heating oil HON2 -0.19% lost 1 cent, or 0.4%, to $2.66 a gallon.
Meanwhile, natural-gas futures furthered their earlier losses as U.S. government data showed a bigger-than-expected increase in last week’s supplies of gas in storage.
July natural gas NGN12 -4.50% traded down 11 cents, or 4.5%, at $2.31 per million British thermal units. It had been trading around $2.40 before the supply data.
The Energy Information Administration reported that supplies of gas in storage rose by 62 billion cubic feet for the week ended June 1. Analysts polled by Platts had expected an increase of between 53 billion and 57 billion cubic feet. Read more on the EIA data.
Myra Saefong is a MarketWatch reporter based in San Francisco.
