DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed lower in thin trading Monday, with all petroleum contracts settling the session with losses as traders continue to assess weakening demand fundamentals in Chinese and European economies against signs of a tighter physical market ahead of the start to the fall-winter heating season in the Northern Hemisphere.

At settlement, NYMEX West Texas Intermediate September futures slipped $0.56 to $80.72 bbl ahead of the contract's expiration Tuesday afternoon after trading at a $82.47 bbl four-day high intrasession. October WTI futures settled at a $0.60 bbl discount to the expiring contract. International crude benchmark Brent contract for October delivery settled the session slightly lower at $84.46 bbl, reversing down from a one-week high $85.86.

In refined fuels, ULSD September futures on NYMEX declined $0.0435 to settle at $3.1162 gallon, finding support at the $3.1108 100-day moving average on the weekly chart. NYMEX RBOB September futures settled down $0.0506 at $2.7726 gallon on Monday, also holding above the 100-day moving average on the weekly chart which ended the session at $2.7608 gallon.

Monday's lower settlements coincide with a modest loss for the U.S. dollar, with the dollar index tapering losses midsession in consolidating gains above 103 with a 103.26 settlement, pressuring equity and commodity markets which ended mixed. Investors now await the beginning of an Economic Symposium in Jackson Hole, Wyoming, where Federal Reserve Chairman Jerome Powell is scheduled to deliver the keynote speech on Friday (8/26). The theme of this year's symposium is "Structural Shifts in the Global Economy."

While it's unlikely Powell will offer any concrete guidance about near-term monetary policy, investors will watch closely for hints whether July's increase in the federal funds rate was the last for the current tightening cycle. Minutes released from the July 25-26 Federal Open Market Committee meeting revealed most participants still saw significant upside risk to the inflationary trend stoked by a tight labor market and resilient consumer spending. At that meeting, FOMC raised the benchmark borrowing rate for the 11th time in 17 months to a 5.25% by 5.5% target range.

In commodity markets, investors are also tracking natural gas prices in Europe that surged more than 10% at the start of the new trading week on news of potential strikes at liquified natural gas facilities in Australia. The disruption could remove up to 15% of global LNG supplies just months ahead of the start of the heating season in the Northern Hemisphere. Although Europe's gas storage levels are near full, the continent has limited storage capacity overall, and remains vulnerable to global supply shocks after Russia exited the European gas market last year following its invasion of Ukraine.

This year, traders are laser-focused on diesel inventories that are alarmingly low on both sides of the Atlantic after a sustained counter-seasonal destocking pattern over the summer months. European stockpiles were 9% below the 10-year average at the start of August, while the distillate shortfall is more pronounced in the United States, where stockpiles are nearly 17% below the seasonal five-year average despite a slowdown in manufacturing and freight activity.

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