CRANBURY, N.J. (DTN) -- Oil futures nearest to delivery on the New York Mercantile Exchange and the front month Brent contract on the Intercontinental Exchange settled mixed, fading from tropical storm-induced short covering highs in post-Labor Day trade, with Tropical Storm Gordon not seen causing long-lasting supply disruptions while worry over a slowdown in global economic growth heightened.
Tropical Storm Gordon is forecast to make landfall tonight as a Category 1 hurricane along the north-central Gulf Coast—somewhere between eastern Louisiana and western Florida. The Bureau of Safety and Environmental Enforcement reported about 9% of oil production in the Gulf of Mexico was shut-in by the storm, shutting-in nearly 157,000 bpd of oil.
Oil futures faded from the highs reached in early morning trading, with Tuesday's NYMEX session beginning 6 PM ET Sunday. ICE Brent traded Monday.
Oil futures ended August near highs on heightened concern over declining Iranian oil exports due to U.S. sanctions, with lost Iranian oil availability dovetailing with flagging production in Venezuela. A ship accident at Venezuela's oil export facility in the Caribbean in late August also reduced shipping capacity at the facility.
Worry over narrowing world supply availability in the fourth quarter when global oil demand peaks was also lent support by renewed fighting in Libya over the weekend, potentially closing an oil export facility in the North African nation.
However, market concern is gradually considering the potential for lost demand growth amid global trade disputes, especially between the United States and China, while the U.S. dollar reached a two-week high in index trading against a basket of currencies. The stronger greenback is worsening the debt load of several emerging market economies, including Turkey, that were seen aiding global economic growth.
Earlier Tuesday, the U.S. Purchasing Managers Index for manufacturing slowed from 55.3 in July to 54.7 in August, with readings above 50 showing growth. The global PMI for manufacturing in August slipped from 52.8 in July to 52.5 in August, a 21-month low.
Additionally, media reports from Reuters and Bloomberg both show higher oil production from the Organization of the Petroleum Exporting Countries in August to a more than one-year high. Bloomberg reported August OPEC production at 37.74 million bpd and Reuters estimates output at 32.79 million bpd, which compares with OPEC crude production in July at 32.323 million bpd.
NYMEX October West Texas Intermediate futures settled up $0.07 at $69.87 bbl, sliding from a $71.40 nearly eight-week high on the spot continuation chart. ICE November Brent futures settled up $0.02 at $78.17 after trading at a $79.72 nearly 3-1/2 month high on the spot continuous chart.
NYMEX October ULSD futures spiked to a $2.3093 gallon 3-1/2 year on the spot continuous chart following Friday's expiration of the September contract. NYMEX October RBOB futures settled down 0.28 cents at $1.9942 gallon, carving out a 4.52 cents gap on the spot continuous chart with a $2.0624 intraday high following Friday's expiration of the September contract. September RBOB futures expired at $2.1437 gallon.
The steep differential between the delivery months reflect the end of peak driving demand during the summer months and change to winter fuel specifications that are less expensive to produce.
Brian L. Milne can be reached at email@example.com
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