DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil prices edged higher Monday morning, extending gains into the fourth consecutive trading day. On Friday, Federal Reserve Bank Chairman Jerome Powell signaled a return to interest rate cuts, perhaps as early as at the next FOMC meeting in September.

NYMEX-traded WTI for October delivery rose $0.47 to trade near $64.13 bbl, and ICE Brent for October delivery gained $0.41 to $68.14 bbl.

September RBOB gasoline futures dipped $0.0010 to $2.1575 gal, and the front-month ULSD contract added $0.0340 to $2.3421 gal.

The U.S. Dollar Index strengthened by 0.216 points to 97.815.

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.