DTN Weekly Oil Update
Oil Futures Slump to Seven Month Lows Amid Wider Selloff
VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended losses as part of a broader selloff in financial markets triggered by risk-off sentiment. Against the backdrop of growing bearish sentiment fueled by poor macroeconomic data out of China for the past month, fears of a potential U.S. recession looming tipped the balance and had investors abandon equities and most commodities for safer havens.
Chinese demand concerns have been outweighing supply risks despite a chain of military escalations in the Middle East, leading to four consecutive weeks of losses for crude oil futures. On Monday, West Texas Intermediate front-month futures fell to an intraday low of $71.67 barrel (bbl), the lowest since early February, and Brent front-month futures slipped to $75.05 bbl, marking a seven-month low. Last week, a series of bearish macroeconomic data releases from the U.S., including ISM's manufacturing PMI showing a deeper-than-expected contraction and a weak payroll report, set the stage for Monday's selloff in Asian markets. In reaction, investors' expectations have largely shifted from a 25-basis point cut to a 50-point cut to the Federal Reserve's target rate at their September meeting.
While broader economic concerns have taken center stage, oil received some support from supply concerns over the latest series of escalations between Israel, Iran and its proxies in Lebanon and Yemen, as well as from the production shutdown at Libya's largest oil field. Barring a major military escalation leading to a wider regional hot conflict, however, OPEC's ample spare production capacity alone can feather moderate supply losses, dampening the effect of supply side risks.
Near 10:00 a.m. EDT, WTI futures for September delivery were trading near $72.85 bbl, down $0.67, and Brent for October delivery hovered around $76.19 bbl, down $0.62. RBOB and ULSD for September delivery dropped to $2.2914 gal and $2.2836 gal, respectively.
Karim Bastati can be reached at karim.bastati@dtn.com
