Oil Futures Gain on Weaker US Dollar, Strong Chinese PMI Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Heading into the last trading day of August, nearby-delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange pushed higher, boosted by a sagging U.S. dollar and stronger-than-expected readings on China's manufacturing activity in August, underlining optimism for a solid demand recovery in the world's second largest economy.

The U.S. Dollar Index, which tracks the greenback against a basket of six global currencies, fell 0.11% to a two-year low 92.280, spurring gains for West Texas Intermediate futures in overnight activity. The greenback is on track for its fourth consecutive decline in August and remains exceptionally weak against all other major currencies.

Near 7:15 a.m. ET, the WTI September contract advanced 50 cents to $43.46 per barrel (bbl) and international Brent crude for November delivery jumped 67 cents or 1.5% to trade near $46.49 bbl. NYMEX RBOB September futures gained 0.86 cents to $1.3241 gallon ahead of expiration Monday afternoon, with next-month delivery October contract widening its discount to 6.83 cents gallon. NYMEX ULSD futures for September were 1.57 cents higher at $1.2319 gallon and next-month delivery October futures traded with 1.98 cents premium before assuming the front-month position Tuesday.

Overnight data out China showed its economic activity continued in expansion for a sixth straight month in August, with services hit by the pandemic reporting particularly strong business vitality. Air travel, railway and hospital all logged strong gains in activity, with their sub-indexes standing above 60. China's non-manufacturing index came at 55.2 for the reviewed month versus 54 expected.

"This month, demand continued to recover, foreign trade policy took effect, new growth driver development accelerated, the market gradually picked up, and business expectations improved," said Zhao Qinghe, the senior statistician at China's National Bureau of Statistics.

Meanwhile, China Petroleum & Chemical Corp said Monday it expects China's refined fuel consumption to jump back to positive growth in the second half of this year. With China's economic recovery taking hold, the end-user demand for gasoline, diesel and kerosene is expected to rise 1% in the second half from a year earlier, after a 13% fall in the first half, a company vice president said at a briefing.

Meanwhile, U.S. Gulf Coast drillers and refiners resumed some production this weekend after Hurricane Laura dissipated into post-tropical depression, leaving most of the region's energy infrastructure unscathed. As of 12:30 p.m. ET Sunday, 69% of the oil production and 49% of the natural gas production in the federally administered areas of the U.S. Gulf of Mexico remain shut-in, according to estimates by the Bureau of Safety and Environmental Enforcement. Chevron and British Petroleum have reportedly redeployed workers to their offshore platforms in the GOM.

Separately, Libya on Sunday partially restarted crude oil exports after the rebel forces loyal to the General Khaliah lifted the blockade of oil fields earlier this month. Bloomberg reported the Suezmax tanker Episkopi arrived Sunday into Libya's port of Brega to load 600,000 bbl for Vienna based OMV AG. Another vessel of a similar size is expected on Thursday. Earlier this month, eastern forces announced they would allow a partial resumption of crude exports after seven months of blockade to help relieve electricity shortages in parts of the country. The eastern-PFG is loyal to the Libyan National Army and its leader Khalifa Haftar, and Maghrabi said Haftar had approved the reopening of five ports -- Es Sider, Ras Lanuf, Zueitina, Marsa el-Hariga and Brega.

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

Liubov Georges