DTN Oil Update

Maria Eugenia Garcia
DTN Energy Editor

HOUSTON (DTN) -- Oil futures prices rose on Monday amid expectations of tight supplies driven by potential sanctions on Russian crude trade as talks to reach a Russia-Ukraine ceasefire have stalled. The bullish sentiment was supported by recent comments from Federal Reserve Bank Chairman Jerome Powell signaling a return to interest rate cuts, perhaps as early as the next FOMC meeting in September.

While interest rate cuts typically lead to higher oil demand, it was sluggish economic growth rather than low inflation prompting Powell to consider this step, keeping gains in check. Oil has been trading in a narrow range since early August as traders are awaiting more clarity on U.S. policy vis-a-vis Russia. The White House has lately been signaling a willingness to negotiate an end to the war in Ukraine, while at the same time threatening tougher sanctions on Russian oil trade and secondary sanctions on buyers of Russian oil.

The push-and-pull on oil prices hasn't been entirely driven by geopolitical considerations. Macroeconomic indicators and low oil inventories across the OECD have been pointing to healthier-than-expected near-term demand, but supply growth is set to rapidly outpace demand growth over the coming months, with most market observers expecting a surplus by year-end.

On Friday, the Bureau of Economic Analysis is set to release its second PCE price index estimate for the second quarter, as well as the second estimate for Q2 GDP growth. The PCE price index serves as the Federal Reserve's preferred inflation metric and will provide more insight into future FOMC policy.

The NYMEX WTI futures contract for October delivery rose by $1.05 to $64.71 bbl, and ICE Brent for October delivery increased by $0.97 to $68.70 bbl.

September RBOB gasoline futures dropped by $0.0095 to $2.1490 per gallon, and the front-month ULSD contract climbed by $0.0385 to $2.3446 per gallon.

The U.S. Dollar Index strengthened by 0.806 points to 98.405.