Oil futures rose on Thursday, shedding early losses on worries about economic growth amid the Federal Reserve’s latest rate hike, to end higher after the US announced fresh economic sanctions on Iran.
A visit by European leaders to Ukraine, meanwhile, was also likely to be supportive of oil prices as it signaled the potential for more sanctions on Russia’s energy sector.
West Texas Intermediate crude for July delivery CL.1,
Soared $2.27, or 2%, to $117.58 a barrel on the New York Mercantile Exchange, marking a partial rebound from Wednesday’s 3% decline.
August Brent Crude Oil BRN00,
the global benchmark ICE Futures Europe was up $1.30, or 1.1%, at $119.81 a barrel. Based on front month contracts, Brent and WTI settled around their lowest level in two weeks on Wednesday.
Back on Nymex, July Gasoline RBN22,
rose 1.6% to $3.9554 a gallon during July heating oil HON22,
rose nearly 0.6% to $4.5719 a gallon.
July natural gas NGN22,
rose 0.6% to $7.464 per million British thermal units.
Oil prices bottomed and reversed direction on Thursday after news that the US “imposed fresh economic sanctions on Iran to force the oil-producing nation back into a nuclear deal,” said Tyler Richey, co-editor of Sevens Report Research , opposite MarketWatch.
That This was announced by the US Treasury Department on Thursday It sanctioned a network of Iranian petrochemical producers, as well as “front companies” in China and the United Arab Emirates that support companies allegedly facilitating the sale of Iranian petrochemicals abroad.
Meanwhile, Troy Vincent, senior market analyst at DTN, said oil trading got a boost on Thursday as a visit by European leaders to Ukraine was “interpreted as bullish on oil as it quite signals a further one.” next round could be [European Union] Sanctions against Russia and continued pressure on Russia’s oil trade.”
US and global benchmark prices started Thursday on a negative note as stocks and other perceived risky assets fell. Crude oil ended Wednesday at a two-week low after the Federal Reserve announced a 75 basis point rate hike, but stocks initially rallied after the decision.
The energy market has been volatile in recent sessions as the Fed’s “outrageous rate hike, growing concerns about the global economy and subsequent demand estimates, and a surge in domestic production have sparked a wave of profit-taking after oil’s recent run.” Richey said.
“However, the dominant trend in the market remains bullish as geopolitical fear stemming from the war in Ukraine more than offsets the handful of fundamental headwinds (including new Iran sanctions) the energy sector is currently facing.” , he said.
Read: As the Fed aggressively hikes rates, here are 4 takeaways from Jerome Powell’s press conference
The Fed’s decision to accelerate rate hikes is “both an admission that the Fed has been far too optimistic about the inflation outlook and a growing questioning of the Fed’s outlook for economic growth,” DTN’s Vincent said. “It is this increased likelihood of bringing forward the end of the business cycle and the next recession that worries oil markets as it would lead to falling oil demand.”
“ The Fed’s decision to accelerate rate hikes is “an admission that the Fed has been far too optimistic about the inflation outlook, and increasingly casts doubt on the Fed’s prospects for economic growth.” ”
The Swiss National Bank also raised interest rates by half a point to minus 0.25%, while the Bank of England hiked it by a quarter point on Thursday.
Nonetheless, Vincent told MarketWatch that the Fed’s decision is unlikely to be the main cause of the drop in oil prices this week. For weeks WTI oil futures have traded more than 2% lower while Brent oil is down more than 1%.
Continued strength in Russian oil flows and weakness in US gasoline and distillate heating oil demand amid record high prices are “more important” to oil market participants than the larger-than-usual rate hike on the Fed funds rate, Vincent said.
On Thursday, the US Energy Information Administration reported that domestic natural gas inventories rose 92 billion cubic feet in the week ended June 10. That compares to a median forecast for an increase of 89 billion cubic feet from analysts polled by S&P Global Commodity Insights.
The working gas inventories include revisions to “reflect the resubmission of data during the three-week period from May 20, 2022 to June 3, 2022,” the EIA said. Working gas is the amount of gas available on the market. Total working gas reserves in storage are 2.095 trillion cubic feet.
https://www.marketwatch.com/story/oil-turns-lower-as-central-banks-hike-interest-rates-11655382294?rss=1&siteid=rss Oil prices rise as US announces new sanctions on Iran