Oil futures edges lower amid cautious trade

2015-09-07

Crude-oil futures pared early losses in Asian trade Monday, but were still trading marginally lower on demand concerns and amid lingering fears over volatility in China’s markets after Asia’s top oil consumer cut its growth rate for last year.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in October CLV5, -0.96%  traded at $45.79 a barrel, down $0.26 in the Globex electronic session. October Brent crude LCOV5, -1.09%   on London’s ICE Futures exchange fell $0.32 to $49.29 a barrel. Nymex and Brent futures regained some ground after having fallen as much as 1.6% earlier in the session.

Oil prices had ended mixed last week, with Nymex crude gaining 1.8% while Brent crude lost 0.9%. Nymex crude has risen for two consecutive weeks and Brent crude has fallen for eight of the past 10 weeks; both oil benchmarks are down by around 13%-14% year-to-date.

Markets were tracking the U.S. non-farm payrolls data on Friday, which missed expectations and had a mixed impact. “Nonetheless, the robust U.S. employment report left investors feeling nervous that the Fed will press ahead with its first interest rate hike soon, if not necessarily in September then certainly by the end of the year,” Capital Economics said.

Read: Get ready for a lousy September as investor sentiment slips

Analysts said while a U.S. rate increase is a lesser threat to global commodity prices than a “hard landing” in China, they are relatively more optimistic on the outlook for the Chinese economy. They expect Brent crude prices to recover to $55 a barrel by end-2015.

Earlier Monday, China cut its growth rate for last year to 7.3% from 7.4%, in a move likely to add to worries about the world’s No. 2 economy.

Chinese equity markets reopened after a long holiday weekend and market sentiment was largely cautious. Asian markets swung between gains and losses and the Shanghai Composite Index SHCOMP, -2.52%  trimmed early gains to last trade roughly 1% higher.

“Looking at crude oil prices alone, we are mainly seeing prices consolidating and not showing continued signs of a rally,” analyst Daniel Ang at Phillip Futures said in a report. “This is expected as we continue to believe that Iranian oil flowing back into the market is dampening any bullish sentiments.”

Ang said this week’s main datapoint will be the eurozone’s second-quarter economic growth figures, which are unlikely to shake markets, and expects WTI and Brent crude to be supported at $43.53 and $46.81 a barrel, respectively.

Last week, the latest U.S. oil rig-count data from Baker Hughes showed a decline of 13 units to 662, the first decline in seven weeks, although it isn’t clear if this was in response to the sharp fall in oil prices at the end of August.

Funds were a little more bullish on Nymex crude, with the latest Commodities Futures Trading Commission data showing speculative long positions in crude oil futures outnumbered short positions by 220,342 contracts against 215,563 last week, ANZ said.

Nymex reformulated gasoline blendstock for October CLV5, -0.96%  — the benchmark gasoline contract — rose 2 points to $1.4184 a gallon, while October diesel traded at $1.5856, 104 points lower.

ICE gasoil for September changed hands at $480.25 a metric ton, down $4.75 from Friday’s settlement.

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