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Futures Movers: Oil futures settle higher on SPR talk; natural-gas prices end almost flat

Oil prices recouped on Thursday some of their recent losses from a larger-than-expected rise in U.S. crude inventories, after the Energy Department reportedly said it has no plans to release crude from its Strategic Petroleum Reserve.

Natural-gas futures, meanwhile, ended almost flat after spending the bulk of the trading session lower after Russia on Wednesday said it would raise natural-gas supplies to Europe.

U.S. Energy Secretary Jennifer Granholm raised the possibility of a release of oil from the government’s SPR to help calm the surge in gasoline prices, the Financial Times reported on Wednesday. She told the FT Energy Transition Strategies Summit that she is not ruling out a ban on crude-oil exports. However, Bloomberg News reported Thursday that the Energy Department said it has no plans to tap the SPR.

With the Energy Department apparently walking back Granholm’s comments, “it’s clear that the Biden administration doesn’t have a lot of options in trying to cool down this red hot crude oil market,” said Phil Flynn, senior market analyst at The Price Futures Group.

Oil prices also moved up along with the stock market because the U.S. debt ceiling debate is being settled, at least for now, and that’s “taking the risk of a near-term recession off the table, and puts off the potential debt ceiling calamity for another day,” increasing oil demand expectations, Flynn told MarketWatch.

See Schumer: Senate could act ‘as soon as today’ on lifting debt limit after agreement reached

West Texas Intermediate crude for November delivery
CL00,
+1.80%

CLX21,
+1.80%

climbed by 87 cents, or 1.1%, to settle at $78.30 a barrel. The U.S. benchmark fell 1.9% Wednesday, retreating from Tuesday’s close at a nearly seven-year high. WTI remains 1.3% higher for the week.

December Brent crude
BRN00,
+0.61%

BRNZ21,
+0.61%
,
the global benchmark, added 87 cents, or 1.1%, to $81.95 a barrel on ICE Futures Europe after Wednesday’s 1.8% decline.

In the natural gas market, more supplies from Russia would “provide a relief” as current gas storage sites are just under 76% full, compared to a 10-year seasonal average of almost 90%, said Rohan Reddy, analyst at Global X, a provider of global exchange-traded funds.

However, “it is still unclear whether Russia will offer a significant amount of supplies to “solve the energy shortage issue,” he told MarketWatch, adding that Russia majority state-owned Gazprom has already exceeded its contractual obligations by more than 8% this year in Europe, and Europe still suffered from supply issues.

Supply is only part of the problem, said Reddy. “Increasing demand and competition for energy sources” are becoming an issue.

On Thursday, November natural gas
NGX21,
+1.92%

NG00,
+1.92%

settled at $5.677 million British thermal units on the New York Mercantile Exchange. That’s a fraction of a cent above the $5.675 settlement on Wednesday, when prices dropped 10.1% following Tuesday’s finish at the highest since December 2008.

Prices managed to pare some of their earlier losses after the Energy Information Administration on Thursday reported that domestic supplies of natural gas rose by 118 billion cubic feet for the week ended Oct. 1. That compared with an increase of 111 billion cubic feet forecast by analysts polled by S&P Global Platts.

The remarks by Putin, who said Russian gas sales could hit a record, had weighed on both natural gas and crude prices.

Europe is entering the winter heating season with very low natural-gas inventories, said Rob Thummel, portfolio manager at energy investment firm Tortoise. Asia, meanwhile, does not have a lot of natural-gas storage and is securing all energy supplies elsewhere, leading global commodity prices to rise, he said.

With elevated prices for natural gas, as well as coal, oil could be used as a substitute in certain regions, though Thummel emphasizes that “oil won’t be the savior” for the energy market because natural gas is the primary source of heating in the U.S., Europe and Asia.

Read: Lofty prices for natural gas may fuel a swing back to oil as a power source

Some analysts, however, believe the retreat in natural-gas prices may tone down expectations that gas-fired power plants could switch to oil.

“Putin’s sudden willingness to play nice threatens to eliminate the fuel switching conversation that had become the latest hot topic in the energy market,” said Robert Yawger, director of energy futures at Mizuho Securities, in a note.

The chief executive of Saudi Aramco earlier this week had said the gas-to-oil shift would add 500,000 barrels a day of demand to the oil market, he noted.

Also Wednesday, the EIA reported that U.S. crude inventories rose by 2.3 million barrels for the week ended Oct. 1, marking a second straight weekly climb.

Rounding out action on Nymex, November gasoline
NGX21,
+1.92%

edged up by 1.1% to $2.334 a gallon, while November heating oil
HOX21,
+1.20%

added 0.7% to $2.46 a gallon.

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