Oil Futures End Monday Little Changed

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- After trading in tight ranges for most of the session, West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange ended Monday little changed as the growing health crisis in the United States linked to massive new outbreaks of the coronavirus in some parts of the country offset mostly upbeat economic data out of major economies, pointing to continued recovery in the post-lockdown period.

NYMEX August WTI settled little changed at $40.63 barrel (bbl) and the international crude benchmark Brent for September delivery settled just above $43 bbl. Overall, Monday trade was quite choppy for both crude contracts with traders seemingly unwilling to take oil in either direction.

NYMEX RBOB August futures settled 1.84 cents lower at $1.2408 gallon under pressure from surging virus cases in the U.S. and the potential impact on driving demand. The country on Sunday, July 5, recorded its largest single-day increase in new COVID-19 infections at +58,000. U.S. gasoline demand remains worth watching in the coming days due to its overall importance to the market as well as a higher degree of uncertainty. There have been emerging signs U.S. motorists are pulling back on driving in large states like Florida, California and Texas as business shut down again.

On the session, NYMEX ULSD August futures gained 1.06 cents to settle at $1.2417 gallon, lent support from encouraging U.S. economic data. The Institute of Supply Management reported U.S. non-manufacturing index soared 11.6 percentage points to 57.1% in June, the largest single-month percentage increase since the report was first launched in 1997. The reading also came well above consensus for a more modest increase to 50.2%.

Overnight data out of the Eurozone also proved bullish for the markets, with May's retail sales jumping a whopping +17.8% after plunging into double-digit contraction back in April. European Central Bank Chief Christine Laggard doesn't count on recovery to be smooth and fast but thinks the worst of the crisis is over. "There is no question in my mind that central banks need to use all tools available" she added.

Oil futures started off Monday trading higher on the back of an aggressive price move by Saudi Aramco that raised its official selling price for its Arab Light crudes for the third month in row. In August, the state-run oil giant hiked export prices to all major markets, including the U.S. and European Union.

The Saudi state producer makes its pricing decision based on local demand fundamentals, so the latest price move was "a bullish sign" for the market outlook in a wake of coronavirus lockdown.

The implied volatility for international crude benchmark Brent dropped to its lowest since prices started collapsing in early March, with markets looking to tightening global oil supplies and improved economic data out of major demand centers. The Saudi-led coalition of 23 producers has been withholding 9.7 million barrels per day (bpd) from the global oil market to offset the deep plunge in demand back in March-April. Russian Energy Minister Alexander Novak now says the global oil market could face a shortage of 3-5 million bpd this month, with the latest comments indicating the group likely to ease steep supply cuts in August.

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

Liubov Georges