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Crude oil futures gave up early gains to finish lower Tuesday, as concerns over potential supply disruptions from Hurricane Beryl eased during the session.
U.S. crude had climbed on Monday, as traders believed Beryl might have a wider impact on offshore oil production areas in the Gulf of Mexico, but traders’ worries over supply problems faded as new forecasts emerged.
Beryl is a dangerous Category 5 hurricane moving through the Caribbean Sea, but it is expected to have weakened into a tropical storm by the time it enters the Gulf of Mexico late this week, according to the U.S. National Hurricane Center.
“Markets came to the realization that Beryl is not going to shut down any major amounts of offshore oil production,” Phil Flynn of Price Futures Group said, according to Reuters, adding that a few rigs may shut, but the hurricane will have “a minimal impact on platforms.”
Front-month Nymex crude (CL1:COM) for August delivery closed -0.7% to $82.81/bbl, and front-month September Brent crude (CO1:COM) settled -0.4% to $86.24/bbl.
Also, U.S. natural gas continued to lose ground on forecasts for cooler weather, with front-month August Nymex natgas ending -1.7% to $2.435/MMBtu.
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Oil prices had finished Monday at their highest since late April, lifted in part by expectations for strong travel for the July Fourth holiday on Thursday, as AAA has projected a record 60.6M people will travel by auto during Independence Day week, 2.8M more than last year.
Prices have been lifted by geopolitical tensions and demand expectations around the July 4 weekend, Peter Cardillo of Spartan Capital said, but from a supply and demand viewpoint, the market could be near a short-term top.
“I would think once we pass the July 4 week, we will probably see some sort of a selloff,” Cardillo said, according to Dow Jones. “That doesn’t mean today or tomorrow, but probably back down to $80 or maybe the $78 range.”
The market has been overbought on geopolitical unrest and is poised for some profit-taking, Dennis Kissler of BOK Financial told Dow Jones, saying the fundamentals “don’t necessarily justify the latest rally that we’ve had.”
Comments by Fed chairman Jerome Powell showing the U.S. central bank still cautious about cutting interest rates also could be playing a role, Kissler said, adding that “the Fed’s still pretty hawkish.”