Oil Futures Ease Off 4-Week Highs

WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and Intercontinental Exchange moved off four-week highs Monday, with West Texas Intermediate dropping 1.5% in value ahead of a highly anticipated Federal Open Market Committee meeting and third quarter U.S. GDP reading this week.

Oil futures also came under selling pressure after China released downbeat economic data overnight showing corporate earnings declined for the second consecutive month, again illustrating slowing growth in the world's second largest economy.

At the start of the new trading week, NYMEX December West Texas Intermediate futures dropped $0.85 to a $55.81 settlement, while ICE December Brent contract posted a more modest decline, down $0.45 to settle at $61.57 barrel (bbl). NYMEX November ULSD futures moved lower 1.78 cents to finish the session at $1.9618 gallon and the November RBOB contract settled little changed at $1.6728 gallon.

Oil futures snapped five consecutive sessions of gains on Monday, as traders positioned ahead of the FOMC two-day meeting set for Tuesday and Wednesday. Markets mostly expect the central bank to lower interest rates by 25 basis points at the conclusion of a two-day meeting, though the Fed remains deeply divided on the direction of U.S. monetary policy.

This week investors will also watch for U.S. GDP reading for the third quarter to be released Wednesday, with consensus calling for a 1.7% increase versus 2% in the second quarter. Consumer spending is seen slowing to 2.6% in the period from July to October, dragging lower the overall economic growth rate. On Friday, U.S. Labor Statistics will release the latest employment figures for September, with expectations again calling for slowing job growth, tied to cooling off in domestic manufacturing and a strike at General Motors by the United Auto Workers.

Lower settlements also came after China reported a steep 5.3% drop in industrial profits last month, largely attributed to protracted tariff dispute with the United States. The most affected sectors were oil and fuel processing industries, with profits plunging nearly 50% in the first six months of the year, according to China's National Bureau of Statics. Still, markets remain optimistic the phase 1 of long-awaited trade deal between the world's two largest economies would be finalized next month.

China's Ministry of Commerce issued a statement Sunday that the two countries "agreed to properly resolve their core concerns and confirmed that the technical consultations of the text agreement are basically completed."

U.S. President Donald Trump and China's Xi Jinping are expected to seal the deal during the Asia-Pacific Economic Forum in Chile on Nov. 16-17.

In financial markets, U.S. equities posted strong gains Monday, extending last week's rally, which saw the S&P 500 come close to a record high. Dow Jones Industrial finished 133 points higher to 27,091, while S&P 500 was up 0.60%.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)