Benchmark Crude Futures Close Higher

WASHINGTON (DTN) -- New York Mercantile Exchange crude futures nearest delivery and Intercontinental Exchange Brent crude settled sharply higher Monday, with the U.S. benchmark gaining more than 2%, bolstered by surging equities and elevated geopolitical risk in the Middle East while signals of economic stimulus across major global economies spurred additional buying interest.

Oil futures posted across-the-board gains Monday afternoon amid a set of bullish factors, including expanded geopolitical risk following Houthi attack on an oilfield in Saudi Arabia and heightened market sentiment that recession fears have been greatly overblown. Iran-affiliated Houthi rebels struck one of the largest oil fields in Saudi Arabia over the weekend, deepening tensions between Iran and its regional rivals in the Middle East. Houthi militia carried out an assault in the southeastern province in Saudi Arabia with 10 drones, setting a fire on the Shaybah oil field which has production capacity of more than 1 million bpd. This was not the first attack on Saudi oil infrastructure by the rebel group. Earlier this year, a Houthi military spokesperson said he had a list of 300 targets in Saudi Arabia and the United Arab Emirates, including multiple oil and gas facilities.

Rallying equities also bolstered oil prices amid growing expectations that major economies would enact countermeasures to improve the weakening growth outlook. Over the weekend, the German government indicated it would take fiscal measures to support the ailing manufacturing sector in the Eurozone's largest economy. Meanwhile, China announced interest rate reform aimed at stimulating its economy, which is hurting from the impact of the trade war with the United States. Last week economic data from both countries came in much weaker than forecast, flashing red signs of what some economists believe to be looming recession.

Following last week's volatility in the financial markets, many economists raised the possibility that the global economy is on the edge of a recession and some even suggested the U.S. economy already entered a mild recession at midsummer. Pushing back against those fears, White House Economic Adviser Larry Kudlow said this weekend there was no recession on the horizon and the U.S. job market is strong along with consumer spending. Kudlow's comments came after government data showed U.S. retail sales increased a fifth consecutive month in July, up 0.7%, despite the latest escalation in the U.S.-China trade war.

Looking ahead this week, the U.S. Federal Reserve will hold its annual policy meeting in Jackson Hole, Wyoming, on Thursday (8/22) and Friday (8/23) with many economists expecting Chairman Jerome Powell to give a stronger indication of another rate cut next month. Market participants overwhelmingly expect the Fed to lower borrowing costs by another quarter percent during the FOMC meeting on Sept. 29-30.

NYMEX September West Texas Intermediate futures gained $1.34 to settle at $56.21 barrrel (bbl), with the WTI October futures contract $0.07 below the front-month contract at settlement. ICE October Brent futures advanced $1.10 to $59.74 bbl at settlement.

NYMEX September ULSD futures finished 2.03 cents higher at $1.8331 gallon, and the September RBOB contract advanced 0.76 cents to settle at $1.6644 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

(CZ)