By Myra P. Saefong and William Watts
Oil futures were mixed on Thursday, with the U.S. benchmark posting its highest close in nearly 22 months, while global benchmark Brent crude suffered its first loss in four sessions.
Speculation that major oil producers next week will discuss a potential increase in production levels put pressure on Brent, after three straight days of gains lifted it to 13-month highs.
A sharp rise in U.S. Treasury bond yields also contributed to “risk-off posture in all markets Thursday,” including crude oil, said Tariq Zahir, managing member at Tyche Capital Advisors.
Meanwhile, signs of a recovery in energy demand, following upbeat U.S. economic data , as well tighter domestic oil supplies, provided some support for U.S. oil, in particular.
“Since the inventory peaks of June 2020, over 90 million barrels of crude oil has been drawn from U.S. inventory,” based on reports by the Energy Information Administration, said Manish Raj, chief financial officer at Velandera Energy. Data from S&P Global Platts also show that 130 million barrels have been drawn from global floating inventory, he said.
But it’s “no secret” that among the reasons for the tightness in the spot market are voluntary supply cuts by OPEC+, said Raj.
West Texas Intermediate crude for April delivery /zigman2/quotes/211629951/delayed CL.1 -0.10% rose 31 cents, or 0.5%, to settle at $63.53 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since May 1, 2019, according to Dow Jones Market Data. During the session, prices had also spent time trading lower, touching a low of $62.65.
The front-month April Brent crude contract , which expires Friday, lost 16 cents, or 0.2%, to $66.88 a barrel on ICE Futures Europe, while the most-active May Brent crude contract fell 7 cents, or 0.1%, to close at $66.11 a barrel.
The Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, will gather next week and are expected to make a decision on production quotas that would likely take effect in April.
Rhetoric from Saudi Arabia saying prices are getting a little lofty likely led to some of the weakness in prices Thursday, said Zahir.
A report from Reuters Wednesday said OPEC+ may discuss a production increase of 500,000 barrels a day when the group meets. OPEC+ will hold a committee meeting on March 3, followed by the main decision-making gathering March 4.
“We have seen one heck of a run and with the 500 lb gorilla (the Saudis) talking about ending their voluntary cut , and maybe even further supply increases,” Zahir told MarketWatch. It’s “not surprising to see, especially after the serious run higher” in oil prices recently. Also, the last thing the Saudis want is to give a boost to U.S. shale oil coming back online, he said.
On Nymex, March gasoline fell 0.2% to close at $1.8923 a gallon and March heating oil lost just shy of 0.1% to end at $1.9066 a gallon, following gains Wednesday. The March contracts expire at the end of Friday’s trading session.
Natural-gas futures made only modest moves Thursday, with the April contract down 2 cents, or 0.6%, at $2.777 per million British thermal units.
The EIA reported on Thursday that domestic supplies of natural gas declined by 338 billion cubic feet for the week ended Feb. 19, with the level of supplies in storage now within the five-year historical average. On average, the data were expected to show a drop of 333 billion cubic feet for the week, according analysts polled by S&P Global Platts.