DTN Weekly Oil Update

Oil Slides on US Dollar Strength, Chinese Demand Woes

VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended their decline Monday morning, as the U.S. dollar index strengthened to a four-month high and Chinese stimulus measures fell short of expectations.

China's Standing Committee of the National People's Congress concluded its week-long meeting Friday with the announcement of a $1.4 trillion debt package geared toward alleviating the growing liquidity crisis of local governments burdened by high debt and falling revenues, and did not include any direct stimulus measures to boost consumption. This further dimmed outlooks on Chinese oil demand growth which had trailed expectations for most of the year.

The package should ease deflationary pressures brought upon local government spending cuts but fails to address those brought upon lackluster domestic consumption. Data released by China's National Bureau of Statistics on Saturday showed consumer price inflation in October slowing to 0.3% year-on-year, with prices falling 0.3% from September. Producer price deflation, meanwhile, accelerated to 2.9% year-on-year, the steepest in 11 months.

The U.S. dollar index reached a four-month high 105.5 on Monday, further pressuring USD denominated commodities. Friday's rally had already erased most gains spurred by OPEC+ postponing a planned output hike. The producer group, which had banked on its largest consumer to drive oil demand growth, slightly lowered growth expectations last month but remained much more bullish than the IEA and EIA. OPEC's monthly oil market report is scheduled for release Tuesday, with EIA's short-term energy outlook following Wednesday and IEA's monthly oil report Thursday.

Near 9:45 a.m. EST, WTI for December delivery was trading near $68.53 barrel (bbl), down $1.85, and Brent for January delivery was down $1.77 near $72.10 bbl. December RBOB fell $0.0423 gal to $1.9702, and December ULSD retreated $0.0374 gal to $2.2015.

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