NYMEX Oil Futures Down

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange settled lower for the second consecutive session Monday, with the ULSD contract down for the third day in a row, as slowing world economic growth is seen as a drag on global demand for oil while domestic and global markets remain oversupplied.

Today's decline in oil futures followed news Chinese officials would likely lower China's annual growth target from 7.0% to 6.5% during their four-day meeting this week when they finalize the country's 13th Five-Year Plan, which sets China's economic and social priorities.

China's slowing economy was the primary catalyst in the oil futures sell-off in August, with world oil demand growth expectations predicated on strong year-on-year consumption gains by the world's second largest economy.

The news dovetailed with a decline in Germany's business sentiment, with the Munich-based Ifo Institute's Ifo Business Climate Index for German industry and trade dipping 0.3 points to 108.2 in October. The report said the decline had nothing to do with the Volkswagen emissions scandal, although sentiment for the overall manufacturing sector for the euro-zone's second largest economy fell for the third consecutive month.

In the United States, the Commerce Department said new home sales tumbled 11.5% in September to an annualized rate of 468,000 that was well below expectations, with sales for July and August revised down.

The advanced reading of U.S. Gross Domestic Product for the third quarter is scheduled for release by the Bureau of Economic Analysis on Thursday, with the Bank of America forecasting the report would show a slowdown from the second quarter's 3.9% annualized growth rate to 1.2%.

NYMEX December West Texas Intermediate crude futures were down 62cts at a $43.98 bbl two-month low settlement on the spot continuation chart, with the December Brent contract on the IntercontinentalExchange slipping 45cts to a one-month low spot settlement at $47.54 bbl.

NYMEX November ULSD futures settled down 2.85cts at $1.4259 gallon, and near a $1.4235 two-month low on the spot continuation chart ahead of the contract's expiration end-day Friday (10/30). December ULSD futures settled down 2.91cts at $1.4490 gallon in the contango market. NYMEX November RBOB futures settled 1.57cts lower at $1.2879 gallon and the December contract dropped back 1.36cts to a $1.2828 gallon settlement.

The early week's focus on economic growth will continue, with the Federal Open Market Committee meeting Tuesday and Wednesday to discuss economic conditions as Fed officials consider lifting the federal funds rate, which hasn't happened since 2006 while currently between zero and 25 basis points established during the Great Recession.

An interest rate liftoff has been contemplated for months, yet market sentiment does not expect a boost in the rate in 2015 because of sluggish economic growth globally and accommodative monetary easing policies by major world economies. A Fed rate hike would likely rally the dollar, making U.S. exports more costly for foreign buyers.

The dollar weakened today, limiting the decline in the WTI contract, after rallying Friday to a 2-1/2 month high in index trading following an announcement from Beijing that cut interest rates and reduced the amount of revenue banks need to hold against deposits. It also came on the heels of comments Thursday from European Central Bank President Mario Draghi, who hinted at additional stimulus measures for the euro-zone economy when the ECB meets in December.

Brian L. Milne can be reached at brian.milne@telventdtn.com


Brian Milne