Oil Lower on Demand Concerns

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved lower Monday morning amid technical pressure, manufacturing data from China that stirred fears of slowing demand and higher supply from Russia and elsewhere.

Traders are now booking profits after the oil complex rallied Friday to two-week highs, with speculative traders exiting long positions in response to bearish supply and demand fundamentals.

Concerns about demand were stoked by fresh disappointing manufacturing data from China while the global oil supply glut was highlighted by news Russia's oil production rose last month to a post-Soviet era high.

At 8 a.m. CDT, NYMEX December West Texas Intermediate futures were down 56 cents trading $46.03 barrel while ICE December Brent crude futures eased 57 cents to $48.99 bbl.

Technical analysts said the medium-term trend remains sideways for both WTI and Brent futures, with resistance holding at $47.24 for WTI and at $52.70 for Brent. The Brent premium over WTI was unchanged at $2.96 as regular trade got underway this morning.

In products trade, NYMEX December ULSD futures eased a fraction to $1.5086 gallon, reversing off a two-week high of $1.5217. The December RBOB futures contract tumbled 1.98 cents to $1.3518 gallon.

On Wall Street, U.S. equities edged higher across the board on positive earnings, with the dollar down moderately.

While lower Monday, the dollar remains near last week's 2-1/2-month high as speculations increase bets the U.S. Federal Reserve will raise interest rates in December if the October jobs report due Friday is positive. The odds of a rate hike have now risen to above 50%, according to a Bloomberg News survey.

The big news Monday is the weak China data. The data compiled by Markit based on a survey of purchasing managers in China showed manufacturing activity nudged up slightly to 48.3 in October from 47.2 in September. That's still below 50 points and the eighth straight month of contraction.

The official government data, which was released Sunday, shows manufacturing activity unchanged in October at 49.8, also below the 50 points that marks the midpoint between a contraction and growth. Taken together, the data added to concerns about China's oil demand growth which has been a major worry in the global oil market.

China's oil demand declined 2.1% in September year-over-year, said a Barclays Capital report, adding that "Fundamentals suggest moderate demand ahead."

Meantime, Russian oil production exceeding a post-Soviet record for the fourth times this year. Russia's crude oil and condensate output rose 36,000 barrels per day or 1.6% to 10.78 million bpd in October, while exports also jumped 14.7% to 4.69 million bpd, the highest in seven years, the energy ministry announced Monday.

Iran is also expected to outline its plans to raise output further next year to the Organization of Petroleum Exporting Countries after implementing the July 14 nuclear deal with six world powers including the United States. OPEC output rose 74,000 bpd to 32.211 million bpd in October, Bloomberg News said, well above the group's 30.0 million bpd.

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