Crude-oil futures settled at their lowest in two weeks on Thursday, with prices still volatile as traders eyed the latest developments in the Middle East for any signs of growing risks to the market in the oil-rich region.
Prices moved away from the session lows, but held onto a loss from Wednesday’s settlement after a fresh reading on the strength of U.S. economic growth.
Price action
-
West Texas Intermediate crude oil
CL00,
-0.44% CL.1,
-0.44%
for December delivery declined by $2.18, or nearly 2.6%, to settle at $83.21 a barrel on the New York Mercantile Exchange. -
December Brent crude
BRN00,
-0.03% ,
the international benchmark, lost $2.20, or 2.4%, to $87.93 a barrel on ICE Futures Europe. Brent and WTI crude both settled at their lowest since Oct. 12, according to Dow Jones Market Data. -
November gasoline
RBX23,
+0.12%
fell 1.2% to $2.26 per gallon, while November heating oil
HOX23,
-0.47%
added 0.4% at $3.04 a gallon. -
November natural gas
NGX23,
-0.19%
gained 6.8% to settle at $3.21 per million British thermal units.
Market drivers
“Fundamentals for oil are taking a back seat to the shifting winds of war,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily note. “It’s war premium in, then war premium out, then war premium back in again.”
Read: 4 reasons why oil prices have only seen a modest Middle East risk premium
Israeli troops briefly raided northern Gaza overnight ahead of a widely expected ground invasion, the Associated Press reported.
“Oil bears were back in action on Thursday as a mashup of demand-side fears and concerns over the economic outlook weighed on the global commodity,” Lukman Otunuga, manager, market analysis, at FXTM told MarketWatch.
U.S. data released Thursday showed the economy grew at a 4.9% annual pace in the third quarter.
While this encouraging report has the potential to stimulate Federal Reserve hike expectations, “it is unlikely to influence the Fed’s rate decision next week,” said Otunuga. “However, more encouraging U.S. data could boost bets around a December move — weighing on oil prices as demand concerns grow.”
Read: U.S. is set to play tug of war with OPEC+ for oil market share as Middle East hostilities warrant output boost
Still, oil managed to trade off the session’s lows shortly after the release of the third-quarter gross domestic product data.
“Looks like consumers went on a spending spree but can it last?” Flynn told MarketWatch.
“Concerns about a potential slowdown in the economy ahead as well as weak seasonal demand for oil is weighing on prices,” he said. “The market also seems to be really getting kicked around by war rumors and the uncertainty seems to be dragging a bit on the global economy.”
Wednesday’s supply data from the U.S. Energy Information Administration, ,meanwhile, reflected larger-than-expected increases in domestic crude and gasoline supplies.
The weekly rise in U.S crude stockpiles reported Wednesday, “coupled with the absence of any immediate supply disruptions in the Middle East has offered sellers an opportunity to attack,” said Otunuga.
The conflict between Israel and Hamas could help to limit any further declines in oil, as speculators remain ready to jump in and buy due in part to the geopolitical uncertainty.
“On one hand you have an uncertain economic background which means weak demand compared to the supply available. On the other you have fears that supply could easily be interrupted should there be an escalation in hostilities across the Middle East. While oil appears to be trading in a minor downtrend, any downside ‘overshoots’ are being jumped on by bullish speculators,” said David Morrison, senior market analyst at Trade Nation.
In other energy trading Thursday, prices for natural gas rallied after the EIA reported that U.S. natural-gas supplies in storage rose by 74 billion cubic feet for the week ended Oct. 20.
The increase was smaller than the average increase of 81 billion cubic feet forecast by analysts surveyed by S&P Global Commodity Insights.
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