Oil prices ended lower Thursday for the first time in three sessions, a day after ending at their highest levels in more than seven years. Investors remained focused on the threat of a Russian attack on Ukraine.
“The market is on guard for a potential disruption of supply because globally supplies remain very tight,” said Phil Flynn, senior market analyst at The Price Futures Group.
Meanwhile, a “blowout” U.S. gross domestic product number also raised some concerns that the Federal Reserve might be even more aggressive in raising interest rates,” he said. “That is playing into the speculation that we could see five interest rate increases this year.”
The U.S. economy expanded at an annual 6.9% pace in the fourth quarter, stronger than the 5.5% rise expected by economists polled by The Wall Street Journal.
Oil’s move came on the back of a stronger dollar, which weighed on dollar-denominated oil prices, said Flynn, but “the market is still concerned about this tight supply situation in the rising geopolitical risk” environment.
Crude wobbled after Wednesday’s close as the Fed teed up a March rate increase and Chairman Jerome Powell struck a hawkish tone in his news conference, but appears to have found its footing Thursday.
West Texas Intermediate crude for March delivery CL.1, -0.27% CL00, -0.27% CLH22, -0.27% fell by 74 cents, or nearly 0.9%, to settle at $86.61 a barrel on the New York Mercantile Exchange after posting a climb of 2% Wednesday.
March Brent crude BRNH22, +0.54%, the global benchmark, shed 62 cents, or 0.7%, at $89.34 a barrel on ICE Futures Europe, after trading as high as $91.04. April Brent BRN00, +0.50% BRNJ22, +0.50%, the most actively traded contract, lost 57 cents, or 0.6%, to $88.17 a barrel.
Both WTI and Brent closed Wednesday at their highest since October 2014.
The fact that oil prices started the session higher, then lost steam, suggests that the day’s trading in oil is “likely being driven more by general investor sentiment, and perhaps moves in the U.S. dollar, than by specific energy markets news,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
A more pronounced price slide in the aftermath of the Fed announcement Wednesday was prevented “by the Ukraine crisis, as there are still concerns that Russian oil and gas deliveries could be hampered in the event of a military escalation,” said Carsten Fritsch, analyst at Commerzbank, in a note.
Russia is the world’s third largest oil producer and second largest supplier of natural gas.
Russia has massed around 100,000 troops on Ukraine’s border as it demands that NATO never admit Ukraine and other ex-Soviet nations as members, and that the alliance roll back troop deployments in other former Soviet bloc nations — demands the U.S. and its allies have deemed non-starters.
The tensions over Ukraine contributes to some uncertainty around a decision on crude production from the Organization of the Petroleum Exporting Countries and its allies next week.
Natural-gas futures, meanwhile, rallied by a somewhat shocking 46%, as the February contracts expired.
February natural gas NGG22, +37.95% climbed $1.99, or 46.5%, to settle at $6.265 per million British thermal units on Thursday. That was the biggest one-day percentage rise based on records going back to 1990 and highest settlement since October, according to Dow Jones Market Data.
“It has to be that physical demand is so high with this looming storm in the [Northeast] that the February futures contract got piled into for those looking to reload stockpiles they expect to offload, amid the impending cold snap,” said Tyler Richey, co-editor at Sevens Report Research.