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Oil futures were trading higher Monday as investors assessed China’s latest efforts to bolster its lagging economy, and monitored the potential threat posed by Tropical Storm Idalia to Gulf Coast crude and product output and demand.
Price action
-
West Texas Intermediate crude for October delivery
CL00,
+0.16% CLV23,
+0.16%
was up 46 cents, or 0.6%, at $80.29 a barrel on the New York Mercantile Exchange. -
October Brent crude
BRNV23,
-0.15% ,
the global benchmark, climbed 49 cents, or 0.6%, at $84.97 a barrel on ICE Futures Europe. November Brent
BRN00,
-0.19% BRNX23,
-0.19% ,
the most actively traded contract, added 54 cents, or 0.6%, at $84.49 a barrel. -
Back on Nymex, September gasoline
RBU23,
-3.59%
fell 2.6% to $2.8008 a gallon, while September heating oil
HOU23,
-3.15%
declined 2% to $3.2402 a gallon. -
September natural gas
NGU23,
+1.97%
was up 3.7% to $2.632 per million British thermal units.
Market drivers
Oil futures got a boost in Asian trading hours after China’s Finance Ministry and the country’s stock market regulator introduced measures aimed at sparking buying interest in stocks, such as a halving of a tax on stock trades and limiting sales by big shareholders in companies that haven’t handed out enough dividends.
Worries about China’s economy, and its demand for energy, had been pressuring prices for oil but the latest news helped to brighten the outlook for oil demand from one of the world’s largest consumers.
Meanwhile, Tropical Storm Idalia formed Sunday in the Gulf of Mexico and was on a potential track to come ashore as a hurricane in the southern U.S., the National Hurricane Center said.
For the crude oil market, while the storm may disrupt some operation in the Gulf of Mexico, “the track so for looks like it will be more of a threat to demand than it will be supply,” said Phil Flynn, senior market analyst at The Price Futures Group, in a Monday report.
“The potential short-term demand destruction and the fact that we’re going into shoulder season [for demand] could overshadow the wildly bullish fundamentals that underpin the oil and products markets,” he said. “We continue to believe that there’s a significant upside risk for prices going into winter and try to take advantage of any short-term weakness to put-on long-term hedges.”
Oil prices had climbed Friday, but booked back-to-back weekly declines after a string of seven straight weekly advances. Crude had seen a lift as Saudi Arabia implemented a production cut of 1 million barrels a day in July that’s due to run at least through the end of September.
“Oil trading volumes show an unusual fall since July when compared to volumes traded in the past two years. That’s partly due to weakening demand fears and falling gasoline inventories, but also due to tightening oil markets as a result of lower OPEC supply,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.
“We know that the demand will advance toward fresh records despite weak Chinese demand. We also know that OPEC will keep supply limited to push prices higher,” she wrote. “Consequently, we are in a structurally positive price setting, although any excessive rally in oil prices would further fuel inflation expectations, rate hike expectations and keep the topside limited in the medium run.”
