DTN Weekly Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended losses Monday morning, following data releases late last week highlighting a slowdown in Chinese economic growth and oil processing.

China's National Bureau of Statistics data showed the unemployment rate jumping to 5.2% in July, the highest since March, while growth in fixed asset investment and industrial production continued to slow, both falling to the lowest rates since December. The decline in new home prices also accelerated, with the Housing Price Index dropping for the 12th consecutive month and at the fastest monthly pace in 9 years.

Concerns over Chinese fuel demand growth have been growing louder over the past few months after customs data revealed year-on-year declines in crude oil processing rates and slowing imports. Data released Thursday showed both refinery throughput and crude oil imports in July falling to the slowest rate in more than two years amid weakening refining margins.

The Organization of Petroleum Exporting Countries and the International Energy Agency last week both revised lower oil demand growth estimates on the back of slower-than-expected Chinese economic growth. Based on the current trajectory, even the IEA's call for a 320,000 barrels per day (bpd) year-on-year increase in Chinese oil demand -- less than half of OPEC expectations -- seems to have to increasingly rely on a fourth quarter turnaround.

The People's Bank of China will set loan prime rates Monday night. Last month, an unexpected 10 basis point cut by the central bank following bearish economic data releases, including the slowest GDP growth in five quarters, failed to move the needle. Another change to current rates is deemed unlikely, but not off the table.

Elsewhere, investors are expecting more clarity around the size of future U.S. interest rate cuts, with the Kansas Federal Reserve Bank's yearly Jackson Hole symposium kicking off Thursday, and the release of the Fed's July meeting minutes Wednesday. Macroeconomic data releases last week have eased U.S. recession concerns, and recent downward revisions to employment growth, while casting doubt over the health of the economy, allow monetary policy responses greater leeway.

At 08:00 a.m. EDT, WTI futures for September delivery were trading near $76.10 barrel (bbl), down $0.55, and Brent for October delivery hovered around $79.16 bbl, down $0.52. RBOB and ULSD for September delivery dropped to $2.3001 gal and $2.3116 gal, respectively, after ULSD last week flipped to a premium to RBOB.

Karim Bastati can be reached at karim.bastati@dtn.com