DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled the session mixed, with crude futures moving sharply higher, as traders monitor the development of a potential Tropical Storm, Invest 91L, over the central Atlantic as well as a system that is expected to emerge off the coast of Africa later this week.

DTN WeatherOps on Monday said Invest 91L has significantly picked up strength and is now forecast to possibly become a tropical depression in about 36 to 40 hours with a gradual strengthening through the end of the forecast period. 91L could become a tropical storm in about 48 hours, with DTN forecasting a 40% chance of intensifying into a category one hurricane over the next several days.

Among other disturbances being monitored this week is Feature 18L, a small but well-defined formation of low-level clouds spinning over the open waters off the coast of Africa. Oil traders will closely monitor the two systems as we move into the peak season for hurricanes in the Atlantic Basin, with the hurricane season which began June 1 so far a nonevent for the U.S. oil and gas industry this year.

Further supporting the oil complex, Saudi Arabia, the de-facto leader of OPEC+, expressed its support last week for agreeing to cut crude oil production when they meet Sept. 5, which would likely tighten the global market heading into colder months. In August, OPEC+ agreed on a token 100,000 bpd increase in collective output that takes effect Sept. 1, citing "limited spare capacity in a number of members."

Analysts believe Saudi Arabia wants to see higher oil prices to incentivize new production and does not want the return of Iranian barrels after talks over ending sanctions on Tehran moved into the final stages. EU, U.S., and Iranian negotiators appear to have reached some sort of breakthrough in their 14-month effort to bring Tehran back into compliance with the 2015 Joint Comprehensive Plan of Action which the United States withdrew from in 2018.

In financial markets, the U.S. dollar index settled higher against foreign currencies on Monday, finishing the session 0.31% higher at 108.790 after trading at a 109.445 20-year high in early trading. Major equity indexes on Wall Street after attempting a rebound following Friday's steep selloff ended lower, with Dow Jones Industrials down 184 points after losing more than 1,000 points on Friday.

Volatility in equity markets follows a hawkish speech by U.S. Federal Reserve Chairman Jerome Powell late last week who reiterated that interest rates are going higher for longer even if higher rates tip the U.S. economy into recession.

"We are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored. We will keep at it until we are confident the job is done," said Powell in prepared remarks at the Fed's annual economic symposium in Jackson Hole, Wyoming.

The hawkish address appeared to quash a market narrative that the central bank would change course from an aggressive path of increasing the federal funds rate. Next, investors will focus on a series of economic data releases in the United States that will give further clues on the pace and size of an almost certain rate hike when the Federal Open Market Committee meets on Sept. 21-22.

First, markets on Tuesday will take a look at the number of U.S. job openings, with the Labor Department's Job Openings and Labor Turnover report expected to show 10.4 million positions were opened in July, down 298,000 from the previous month. Should the report show steeper losses, this could send a signal that demand for labor is falling quicker than expected, which could be a crucial data point ahead of Friday's nonfarm employment report that is anticipated to show 293,000 new positions were filled.

On the session, West Texas Intermediate futures for October delivery settled a tad above $97 bbl, up $3.95 bbl, with open interest for WTI futures at their lowest point since December 2014. The international crude benchmark Brent contract advanced $4.10 to $105.09 bbl. NYMEX September RBOB futures gained 2.63 cents to $2.8776 gallon, while the September ULSD contract declined 9.77 cents to $3.9099 gallon.

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