Oil Follows Equities Market Higher

NEW YORK (DTN) -- New York Mercantile Exchange oil futures tracked the broader equities market higher Monday morning, gaining on dovish comments by a top central bank official and a rally by China’s stock market. However, the upside was curbed by a strengthening dollar and concern over excess supply.

The broader equities market, which is viewed as a barometer of investor confidence and risk-taking, rallied after Federal Reserve Vice Chairman Stanley Fisher suggested the Fed might wait until inflation returns to normal before raising interest rates. His comments moved investors to trim overnight gains for the dollar while boosting U.S. stock futures on Wall Street.

Earlier, weak economic data from China over the weekend instigated speculation that Beijing would move to further stimulate their slowing economy, which is also bullish for commodities.

At 8 a.m. CDT, the NYMEX September WTI crude contract was up 6 cents at $43.93 bbl after reversing off a near five-month spot low of $43.35 bbl. ICE Brent futures gained 31 cents to $48.92 bbl, reversing off a 6-1/2 month spot low of $48.24 bbl.

In products trade, the NYMEX September ULSD contract added 2.08 cents to $1.5644 gallon, off a $1.5758 bbl one-week spot high. NYMEX September RBOB contract climbed 2.13 cents to $1.6443 gallon.

In China, the Shanghai composite index closed higher on data showing China’s exports in July unexpectedly fell 8.3% year on year while imports were down 8.1%.

Fisher told Bloomberg TV that the outlook for the job market is not what’s keeping the Fed from raising rates since we are near full employment, but rather the low inflation. The main stock indexes have been weighed in recent weeks by worry over the prospect of a rate hike, and the comments by Fisher Monday morning helped to ease those worries.

Fisher said he doesn’t expect the first rate hike in nine years to occur until after inflation gets closer to the Fed’s target of 2.0%. Analysts had thought last week’s bullish payroll report would nudge the Fed toward raising rates by September.

On Friday, Baker Hughes showed the number of active rigs drilling for oil and natural gas in the United States rose for the third straight week during the week-ended Aug. 7. Total U.S. commercial crude stocks were 24.5% higher than a year ago despite a 4.4 million bbl stock draw for the week-ended July 31, with output up 52,000 bpd to 9.465 million bpd for the week-ended July 31, Energy Information Administration reported on Aug. 5.

George Orwel can be reached at george.orwel@dtn.com