Oil fell on signs that supplies may recover and concerns that economic growth in China is headed for a slowdown.
West Texas Intermediate fell below $81 a barrel after trading in a range of nearly $2 on Monday. Oil prices diverged from broader markets after Reuters reported that Iraq’s oil minister plans to discuss reviving oil exports through Turkey’s Ceyhan terminal. Adding to bearish sentiment is Iran’s rise in monthly oil exports, which are boosting global flows at a time when other producers are cutting back.
Traders also continue to monitor economic unrest in China that has contributed to recent declines. Chinese banks made a smaller-than-expected cut in their benchmark lending rate on Monday, despite the central bank pressuring lenders to increase lending.
“We will continue to test $80 down on WTI until rates take a breather or we get more aggressive stimulus from China,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “The tightness of the market is priced in pretty well right now, as evidenced through the spreads. Right now, macro is back in the driver’s seat, and rates and China are the drivers.”
However, the market continues to show signs of strength, with the nearest segment of the oil futures curve indicating that supplies are tightening amid production cuts from Russia and Saudi Arabia, linchpins of the OPEC+. Meanwhile, refined products such as diesel, the workhorse fuel of the global economy, have begun to command a scarce price this winter, increasing their premium to the oil from which they are made. Gasoline futures in New York have risen about 13% this year, outperforming crude oil.
The annual Jackson Hole Symposium in Wyoming, which features speakers including Federal Reserve Chairman Jerome Powell, may provide clues about the direction of US interest rates. Low crude oil trading volumes have exacerbated swings, with aggregate open interest nearing its lowest levels this year as investors travel for the holidays.
Prices:
- WTI for September delivery fell 53 cents to settle at $80.72 a barrel in New York.
- The September contract expires on Tuesday.
- Brent for October settlement was down 34 cents at $84.46 a barrel.
