Oil futures rose modestly on Thursday, steadying a day after erasing the rally scored earlier this month after OPEC+ announced an unexpected round of production cuts.
Oil futures inched higher Thursday, with prices attempting to recoup a small portion of the sharp losses see Wednesday.
Prices Wednesday failed to find support even after government data showed that U.S. crude inventories plunged by a much larger-than-expected 5.1 million barrels last week. Analysts said the price drop affirmed that worries about the economic outlook continue to hold sway over the market.
"The First Republic banking scare killed oil," Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch late Wednesday. Reports Wednesday said that the U.S. government is unwilling to intervene to help rescue the bank.
"That was like yelling fire in a crowded movie theater," Flynn said. It could possibly become a "mini Lehman Brothers" crisis if the government lets the bank fail.
"When the banking sector looks wobbly, it is always a risk-off event for oil," he said.
The recent decline for oil prices also saw crude futures fill in the gap left on the daily price chart early this month after Saudi Arabia and its OPEC+ allies announced 1.15 million barrels in additional production cuts beginning in May running through year-end, with Russia pledging to extend a 500,000 barrel-a-day cut through the rest of 2023.
The closure of the gap "was all but inevitable once futures fell beneath the April 3 low of $79/barrel. The new [year-to-date] highs established this month, however, shifted the medium-term technical outlook for oil in favor of the bulls," wrote analysts at Sevens Report Research, in a Thursday note.
"While it is possible that the April highs were a head fake or false breakout, for now we still expect WTI to stabilize near previous 2023 support in the low $70s and potentially rebound to form a new trading range centered around the upper $70s as the fundamental backdrop is reassessed," they wrote.
Natural-gas futures edged higher Thursday after the Energy Information Administration reported that natural-gas stocks in storage rose by 79 billion cubic feet for the week ended April 21.
On average, analysts expected the EIA to report a climb of 72 billion cubic feet, according to a survey conducted by S&P Global Commodity Insights, which noted a five-year average increase of 43 billion cubic feet.
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