Oil futures: Brent slides below $85/b, surrenders early gains
Quantum Commodity Intelligence – Crude oil futures Monday were drifting lower, surrendering earlier gains as tighter supply/demand fundamentals were counterbalanced by broader economic concerns.
Oct23 ICE Brent futures were trading at $84.44/b (1945 GMT), compared to Friday's settle of $84.80/b, having surrendered the earlier gains that lifted prices to a high of $85.86/b.
At the same time Oct23 NYMEX WTI was trading $80.12/b, versus Friday's close of $80.66/b. The Sep23 contract was trading at $80.77/b heading into expiry.
Crude benchmarks had registered a first weekly loss in nearly two months on China's missed economic targets and the prospects of further rate hikes in the US and Europe, although markets have shown resilience over the summer following Saudi's extended output cuts and Russia trimming exports.
"China was expected to provide over half of the growth in demand in the oil market in 2022. However, renewed economic weakness has raised questions over whether demand can remain resilient. This comes as policymakers in Europe and the US signal further monetary policy tightening amid high inflation," said ANZ commodity strategist Daniel Hynes.
However, Hynes added physical market continues to show signs of tightness, citing drawdowns in US commercial crude oil stocks and backwardation on the forward curve.
In its latest move to address the faltering recovery, Beijing announced Monday it was cutting the one-year lending rate by 10 basis points to 3.45%, but the five-year loan prime rate, a reference rate for mortgages, was left unchanged at 4.2% for August.
"Unsurprisingly markets were less than impressed by this move, expecting authorities to be much more forceful. This lack of urgency has weighed on Asia markets and is unlikely to spark demand in an economy where loan demand appears to be low anyway," said Michael Hewson of CMC Markets.
Later this week, US policymakers gather for the Jackson Hole Symposium, which will be closely scrutinised for Federal Reserve monetary policy, along with insights into the risks facing central banks.
