Oil Futures Higher on PMI Data, US New Virus Case Retreat

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied in afternoon trade Monday, with West Texas Intermediate September futures settling above $41 barrel (bbl) on reports the U.S. daily coronavirus case-count declined to its lowest in over a month and manufacturing activity expanded sharply in all major demand centers for oil and refined products.

On the session, the U.S. crude benchmark rallied 74 cents to settle at $41.01 bbl and the international Brent crude contract ended the session just above $44 bbl, up 63 cents. NYMEX ULSD futures for September delivery settled 1.69 cents higher at $1.2409 gallon and the front-month RBOB contract surged 4.20 cents or 3.5% to $1.2131 gallon.

Oil complex reversed earlier losses to settle the Monday session higher following supportive manufacturing data out of Eurozone and the United States. Institute of Supply Management's Manufacturing Purchasing Managers' Index jumped to a 16-month high at 54.2% in July, beating most bullish expectations. A notable piece of the data was new orders, which rose to 61.5 versus 56.4 in June as new export sales returned to growth. Rebound in new orders and exports might suggest that August should see further output gains that will likely prove supportive for the oil complex. In the Eurozone, manufacturing activity last month expanded for the first time since early 2019 as demand rebounded sharply, a survey showed on Monday.

"Euro zone factories reported a very positive start to the third quarter, with production growing at the fastest rate for over two years, fueled by an encouraging surge in demand," said Chris Williamson, chief business economist at IHS Markit.

Additionally, WTI futures found some support from data showing there were 47,000 new coronavirus cases on Sunday, the lowest daily count in nearly a month. In most of the 27 states where cases have been trending higher in the past two weeks, the trend line reversed to steady over the weekend, raising hopes new mitigating policies are yielding some results. If that trend were to continue, it might suggest policymakers can reopen schools in the fall, a move most likely to be bullish for oil prices.

Offsetting some of the bullish sentiment, though, are concerns over OPEC's move to start raising production now that demand is recovering from coronavirus. OPEC+ alliance began over the weekend tapering production cuts to 7.7 million barrels per day (bpd) from 9.7 million in May-July. Sources indicate Russia's oil and gas condensate output stood at 9.807 million bpd on Aug. 1-2 versus 9.37 million bpd in July, on average. 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