Oil futures fell Monday as worries over crude supply appeared to fade and demand worries remained in place, after both the U.S. and global benchmarks sank to their lowest since February last week.
Price action
-
West Texas Intermediate crude for September delivery
CL00,
-1.01% CLU22,
-1.01%
fell 95 cents, or 1.1%, to $88.06 a barrel on the New York Mercantile Exchange, after falling 9.7% last week. -
October Brent crude
BRN00,
-0.73% BRNV22,
-0.73% ,
the global benchmark, was down 92 cents, or 1%, at $94 a barrel on ICE Futures Europe, after an 8.7% decline last week. -
Back on Nymex, September gasoline
RBU22,
+0.69%
edged up 0.3% to $2.862 a gallon, while September heating oil
NGU22,
-5.38%
shed 1.5%. -
September natural gas
NGU22,
-5.38%
was down 2.9% at $7.827 per million British thermal units.
Market drivers
Oil futures tanked last week as fears over the potential for a global economic slowdown undercut demand expectations, analysts said. A much stronger-than-expected July U.S. jobs report on Friday and China on Sunday said exports grew 18% to $333 billion in July compared with the same month last year, and rose 17.9% from June.
Imports grew just 2.3% compared with a year ago, while the trade surplus hit an all-time high of $101.3 billion.
“The broader market sentiment has turned negative on recession risk, leading to growing concerns about oil demand. The base case for most commentators is that demand growth will slow globally, and demand destruction is not happening. The broader market is seeing fewer signs of stagflation,” said Stephen Innes, managing partner of SPI Asset Management, in a note.
Meanwhile, a premium for nearby oil futures over contracts for later delivery — a phenomenon known as backwardation — has faded, signaling that an earlier scramble for physical supply has eased.
Energy Information Administration data last week showed crude-oil stocks at Cushing, Oklahoma, the delivery hub for Nymex futures, rose to a two-month high near 24.5 million barrels, noted analysts at the Schork Report.
“A market that was concerned about the Nymex complex scraping tank bottoms just a few weeks ago is now comfortable,” they said, in a Monday newsletter. “Over the past three weeks, the backwardation of the Sep/Oct WTI collapsed from $3 to $0.93, while the Oct/Nov WTI backwardation dropped from $2.43 to $0.82.”
