CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures with nearest delivery settled flat to higher, reversing off new and fresh multi-month lows after computer-generated trading programs kicked in as the West Texas Intermediate crude futures contract tested psychological support at $40.00 bbl.
NYMEX December WTI futures, which expires end-of-day Friday (11/20), traded down to a fresh 2-1/2 month low on the spot continuation chart of $40.06 bbl late morning before selling evaporated. The WTI contract settled down three straight sessions through Friday (11/13), and was down $4.35 or 9.7% during the fourth quarter ahead of today's advance, settling $1.00 higher at $41.74 bbl during an outside day up session.
Today's advance was technical, with the WTI contract climbing despite a fresh surge in the U.S. dollar in index trading, with domestic crude values having an inverse relationship with the greenback.
The dollar continues to find support from expectations the federal funds rate would be increased for the first time in nine years when the Federal Open Market Committee meets in mid-December. The anticipated rate hike, which is a bearish development for commodities, also converges with a weakening world economy, highlighted by a slowdown in China and with Japan slipping into recession in the third quarter, with China the world's second largest economy behind the United States and Japan the third largest.
Slowing economic growth dents oil demand. The International Energy Agency on Friday projected growth in global oil demand would slow from this year's five-year high of 1.8 million bpd to 1.2 million bpd in 2016.
January Brent crude futures trading on the Intercontinental Exchange settled up 9cts at $44.56 bbl, also ending a three-day losing streak with today's modest advance. Brent crude futures fell to a fresh 2-1/2 month low on the spot continuation chart of $43.15 following the December contract's expiration on Friday.
NYMEX December ULSD futures slid to a $1.3508 gallon 6-1/2 year low on the spot continuation chart late morning before reversing the decline, settling up 0.38cts at $1.3851 gallon. NYMEX December RBOB futures settled flat, down three points, at $1.2386 gallon after paring a decline to a $1.2024 gallon 6-1/2 year low on the spot continuation chart.
Although higher on the session, and adding to those gains after settlement, fundamental factors remain bearish, and are expected to reassert themselves in the coming trade sessions.
In addition to slowing demand growth, the market discovered that surging global oil production from the Organization of the Petroleum Exporting Countries and Russia joined by strong U.S. output, albeit down from its April peak of 9.6 million bbl, have allowed oil to pile up in storage facilities.
The Energy Information Administration shows commercial crude oil supply held in the PADD 3 Gulf Coast region at a record high of 252.6 million bbl as of Nov. 6. On Friday, the IEA said oil stockpiles held by the 34-country members of the Organization for Economic Cooperation and Development reached a record high of 3.0 billion bbl. Late last week, the Financial Times reported oil stored offshore in tankers has reached 100.0 million bbl.
Brian L. Milne can be reached at firstname.lastname@example.org
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