Oil Down in Early Trade Monday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved lower at the start of regular trade Monday amid concern over too much supply of crude oil and refined oil products globally while demand is easing in Asia.

Investment bank Morgan Stanley issued a bearish report today calling this "a refinery-driven correction" because of high global gasoline stocks while the investment unit of Barclays bank cited an easing demand growth rate.

"Global oil demand in third quarter 2016 is growing at less than one-third the rate it was in Q3 15," said Barclays Capital. "Anemic economic growth is weighing on oil demand growth over Q3. Fading support from the Organization of Economic Cooperation and Development demand and slower growth out of China and India have loosened the balances in Q3."

Barclays said beyond the third quarter India's oil demand growth is set to again accelerate in the fourth quarter while the consumption pace in China is forecast to moderate.

"The supply side is adjusting sharply in the backdrop, and an uptick in demand over Q4 is likely to tighten market balances again," the investment bank added.

At 9:00 AM ET, the NYMEX September West Texas Intermediate crude oil futures contract was down 73cts to $43.46 bbl, near a fresh 2-1/2 month low on the spot continuation chart of $43.22.

IntercontinentalExchange September Brent futures fell 68cts to $45.01 bbl, near a $44.81 fresh 2-1/2 month spot low.

In products trade, the NYMEX August ULSD futures contract eased 2.03cts to $1.3367 gallon, off a fresh 2-1/2 month spot low of $1.3332. The NYMEX August RBOB futures contract dropped 2.73cts to $1.3342 gallon, near a four-month, three-week spot low of $1.3300.

On Wall Street, equities were lower this morning while the dollar eased after posting a 4-1/2 month spot high overnight. Analysts said the U.S. currency remains strong relative to rival currencies, and that strength is pressing down oil prices.

This comes ahead of the Federal Open Market Committee meeting on Tuesday and Wednesday (7/26-27) to discuss the health of the economy and federal funds rate. The Bank of Japan will also hold its meeting later this week, with the market anticipating the BoJ will announce some form of economic stimulus. The European Central Bank met last week and decided to keep its interest rates unchanged while saying its 80 billion euro-monthly asset purchase program would continue at least through March 2017.

The International Monetary Fund last week cut its 2016 global growth outlook to 3.1% from 3.2% in the wake of Britain's June 23 vote to leave the European Union. A weaker growth rate would undermine energy demand.

Money managers reduced their bets on NYMEX oil futures contract for the week-ended July 19, according to trade data from the Commodity Futures Trading Commission. Noncommercial traders, also called speculators since they are not using a futures contract to hedge an underlying physical position, cut a net-long stance in RBOB futures to its lowest position in one year. A long position is taken on expectations for prices to move higher.

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