Oil Futures Gain on Weaker US Dollar, Improving Economic Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange held higher early morning Tuesday, finding support from an overnight slump in the U.S. dollar and solid manufacturing data out of the Eurozone and China, suggesting ongoing demand recovery will carry into the fall months as the global economy rebounds from the coronavirus pandemic.

Oil market fundamentals remain exceptionally weak as global air travel shows no signs of a meaningful rebound through the end of the year and millions remain unemployed across all major economies. The recent manufacturing data, however, might suggest the global economy is slowly rebounding from its pandemic nadir, with China a critical pillar in the recovery for the oil market as the United States and European Union continue to struggle to normalize.

Caixin survey Tuesday showed China's manufacturing sector grew at the fastest pace in 10 years last month, beating the most bullish expectations. China's PMI index jumped to 53.1 in August from 52.8 in July, with gains led by new orders, suggesting demand would continue to recover. With economic recovery taking hold, China's Petroleum & Chemical Corp. expects end-user demand for gasoline, diesel and kerosene to rise 1% in the second half of 2020 from a year earlier after a 13% fall in the first half, a company vice president said at a briefing Monday.

In Europe, German manufacturers reported the fastest output growth since February 2018, a survey showed on Tuesday. IHS Markit's final Purchasing Managers' Index for German manufacturing, which accounts for about a fifth of the economy, rose to 52.2 in August, crossing the 50 mark that separates growth from contraction for the second time in 20 months. That was lower than a flash estimate of 53.0 but higher than July's reading of 51.0.

Domestically, Institute of Supply Management will release its manufacturing report 10 a.m. ET, with consensus calling for a slight improvement in the U.S. sector to 54.6.

Further bolstering the oil complex, U.S. dollar index again dropped below key support at 92, lifting prompt-month West Texas Intermediate above $43 per barrel (bbl) in overnight trade. Further downside in the greenback would continue to support U.S. crude futures.

The international crude benchmark Brent contract for November delivery advanced 60 cents to $45.88 bbl. NYMEX RBOB October futures added 1.96 cents to trade near $1.2333 gallon and spot-month NYMEX ULSD futures gained 1.31 cents to $1.2304 gallon.

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

Liubov Georges