DTN Oil Update
Oil Futures Rallied, Brent Hits $80
HOUSTON (DTN) -- Oil futures rallied and hit a new four-month high to start the week on Monday due to concerns about tight supplies driven by tougher sanctions from the U.S. on Russian oil and despite the U.S. dollar continued strength against other currencies.
Oil futures prices jumped over $1 Monday morning following the announcement of President Joe Biden's administration, along with the U.K., imposing additional sanctions on Russian oil. These actions target 183 oil tankers from a shadow fleet, two Russian gas producers, traders and ports, among other entities. The sanctions will take effect on February 27.
Expectations for limited global supplies catapulted Monday morning -- the front-month NYMEX WTI futures contract to $77.51 bbl, an increase of $0.94 from Friday, Jan. 10, while the February ICE Brent futures contract jumped by $0.70 to $80.46 bbl. The front-month RBOB futures contract edged up by $0.0200 to $2.0949 gallon, the ULSD futures contract for February delivery rose by $0.0252 to $2.5269 gallon.
The U.S. Dollar Index also maintained its upward trend as it climbed by 0.21% to 109.695 against a basket of foreign currencies.
"It is hard to see the dollar trend changing this week given the prospect of another strong set of US inflation data, which will increasingly raise the question of whether the Fed needs to cut rates this year at all," ING Research said in a report.
A better-than expected trade balance from China also helped to boost oil futures Monday morning.
Data from China's commodity importsâ?¯for December showed a slight improvement in manufacturing activity in the last quarter of last year, while exports saw a strong increase ahead of the inauguration of President-elect Donald Trump, whose administration is expected to impose trade tariffs on Chinese goods.
China's official customs shown exports in December rose 10.7% year-over-year, which was above market's expectations of 7%. Imports rose 1% compared to the previous year, above the estimate of a 1.5% decline.
This week, market participants will be focused on the U.S. Consumer Price Index for December. The CPI rose 0.3% in November, compared to 0.2% in October. The annualized rate of inflation for the all-items index reached 2.7%.â?¯
Last week, U.S. jobs data reported by the Bureau of Labor Statistics showed total nonfarm payroll employment increased by 256,000 in December, compared to 227,000 recorded in November. The figure surpassed market expectations, which ranged from 125,000 to 200,000. The unemployment rate stood at 4.1%, below the market forecast of 4.2%.
Analysts anticipate the Federal Reserve will delay its decision to cut interest rates until October, as recent economic indicators show a better perspective of the U.S. economy for this year.
Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com