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Futures Movers: Oil prices finish higher with supply concerns back in focus

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Oil futures finished higher on Tuesday to recoup their losses from a day earlier and then some, as concerns over tight supplies came back into focus.

Natural-gas futures, meanwhile, rallied by 8%, extending their rise into a second straight session after forecasts for warmer-than-usual U.S. weather pulled prices for the heating fuel down by 23% last week.

Price action

West Texas Intermediate crude for December delivery
CL.1,
+0.45%

CL00,
+0.45%

CLZ22,
+0.45%

rose 74 cents, or 0.9%, to settle at $85.32 a barrel on the New York Mercantile Exchange following a loss of nearly 0.6% on Monday.

December Brent crude
BRNZ22,
-0.66%
,
the global benchmark, was up 26 cents, or 0.3%, at $93.52 a barrel on ICE Futures Europe. January Brent
BRN00,
-0.61%

BRNF23,
-0.61%
,
the most actively traded contract, added 53 cents, or 0.6%, at $91.74 a barrel.

Back on Nymex, November gasoline
RBX22,
+5.88%

rose 6.8% to $2.916 a gallon, while November heating oil
HOX22,
+0.89%

was up 1.2% at $3.9672 a gallon.

November natural gas
NGX22,
+8.60%

climbed by 8% to end at $5.613 per million British thermal units, trading around 13% higher week to date after last week’s drop of 23%.

Market drivers

“Oil prices, in the short term, are locked in a bit of a trading range,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. “We are still in shoulder season and we’re still being influenced by concerns about the global economy and interest rates.”

Meanwhile, the oil market “tries to ignore the dollar but it can’t. When the dollar shows strength, it has put downward pressure on oil,” said Flynn. Still, as the market gets into the winter season, “we’ll see a disconnect between the dollar/oil relationship because oil is going to be needed.”

Prices for oil had posted losses Monday, with investors fretting about the demand outlook for crude, following lackluster September crude import data from China and as the Federal Reserve and other major central banks aggressively tighten monetary policy in an effort to wring out stubborn inflation.

“The negative China headlines and soft U.S. economic data were demand-side negatives for oil” on Monday, analysts at Sevens Report Research wrote in a Tuesday newsletter. “However, hopes for peak-hawkishness bolstered risk assets” during Monday’s session.

While China’s oil imports rose to 9.8 billion barrels for the month, imports since the beginning of the year are still 4.3% down on the equivalent period last year, analysts at Commerzbank, wrote in a note.

“At a good 9.9 million barrels per day, the moving 12-month average remained below the 10 million mark for the second month running. The last time this happened was three years ago. In all likelihood, China is thus set to register a decline in crude oil imports for the second consecutive year despite signs of revival in the past two months and the fact that higher imports are likely in the coming months,” they wrote.

The Sevens Report Research analysts said oil’s new trading range spans “between support in the upper $70s and resistance in the low $90s, as traders assess the outlook for demand amid growing recession concerns but still-tight global supply dynamics.”

WTI is down roughly 35% and Brent is off nearly 33% from March highs seen after Russia’s late-February invasion of Ukraine. Crude has been stuck in a trading range in recent weeks.

The Energy Information Administration will release its U.S. petroleum supply on Wednesday morning, covering the week ended Oct. 21. On average, analysts polled by S&P Global Commodity Insights forecast inventory declines of 800,00 million barrels for crude, 1.6 million for gasoline and 1.5 million for distillates.

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