DTN Oil

ICE Brent Ends July with 5% Gain

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled higher Friday, with both benchmarks notching a third consecutive month of gains in July fueled by ongoing production cuts from the Organization of the Petroleum Exporting Countries and Russia-led partners as producers prepare to open up spigots beginning Aug. 1.

RBOB futures were the exception in the oil complex Friday, under selling pressure amid demand and stalled economic recovery concerns following bearish economic data out of the United States and the European Union. NYMEX RBOB August futures expired 2.73% lower on Friday at a fresh 5-week low $1.1871 gallon, with September RBOB contract assuming the front-month position with 0.16 cents discount.

The now expired ULSD August futures contract finished up 0.4% at $1.2171 gallon and new front-month September ULSD contract settled up 0.8% at $1.2240 gallon. WTI September futures settled the last trading day of July above $40 barrel, while adding 2.7% this month. International Brent crude contract for September delivery expired 36 cents higher at $43.30 barrel, while the October futures contract settled the session with 0.22 cents premium.

Weakness in the U.S. dollar, which has fallen around 5% this month to a 2-year low 93.340 against its global peers, has been supportive for WTI futures that typically trade in U.S. currency. Underlining the greenback's weakness, economic data out of the U.S. this week was dismal. U.S. gross domestic product collapsed 32.9% in the second quarter, the steepest on record, underscoring just how deep the economic damages are from the ongoing coronavirus pandemic. The University of Michigan's latest Surveys of Consumers showed the outlook on the economy and personal finances eroded further in late July due to continued resurgence of the virus.

"The Expectations Index fell back to 65.9 in late July, tied with the 6-year low recorded in May, providing no indication that consumers expect the recession to end anytime soon," said Surveys of Consumers Chief Economist Richard Curtin.

Furthermore, the current trend in the labor market points to further erosion in consumer sentiment, with the number of weekly unemployment claims increasing for a second week in a row. Unemployment benefits of additional $600 a week for nearly 30 million Americans who lost their job due to the pandemic are set to expire Friday, with the U.S. Congress locked in bipartisan bickering over a new stimulus package.

"The markets are gradually recovering, but there are two major uncertainties," Fatih Birol, the IEA's executive director, said in an interview. "One is the shape of the economic recovery globally, and in some of the key areas. And the second one is whether or not we are going to see a second wave of coronavirus."

Against this backdrop, OPEC+ alliance intend to bring some 1.5 million barrels per day (bpd) supply back into global oil markets, beginning Aug. 1. The OPEC+ alliance -- led by Saudi Arabia and Russia -- took a record 9.7 million barrels of daily output, or roughly 10% of global supply, offline when demand plunged over the spring. Key ministers from the 23-nation coalition will hold their next monitoring meeting on Aug. 18.

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

Liubov Georges