Oil futures: Crude eases from highs, Brent holds above $84/b
Quantum Commodity Intelligence – Crude oil futures Monday were marginally lower, although largely consolidated Friday's late gains as markets faced another week of uncertainty over price direction.
Front-month Oct23 ICE Brent futures were trading at $84.40/b (1830 GMT), compared to Friday's settle of $84.48/b, having earlier topped $85/b for the first time in a week. The more-liquid Nov23 contract was trading at $83.85/b, although activity across the curve was slowed by a UK holiday.
At the same time Oct23 NYMEX WTI was trading $80.05/b versus Friday's settle of $79.83/b.
Oil and financial markets were given an early boost after China halved levies on securities trading starting from Monday, while also giving a small lift on margin trading.
However, China's beleaguered property sector remained under pressure as shares in the Evergrande group plunged after trading resumed in Hong Kong following an extended suspension of the firm's shares.
Oil markets were still digesting comments from the Jackson Hole summit after Chair Jerome Powell said the Fed "are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."
"Powell reaffirmed that the Fed remains focused on hitting the 2% inflation target and keeping it there," noted James Knightley, Chief International Economist of ING.
However, analysts are divided on the next move from the Fed when officials meet for the next FOMC on 20 September 20.
"We forecast the Committee will remain on hold at subsequent meetings, but we acknowledge the risk of further tightening if economic growth does not slow to a below-trend rate and/or inflation remains unacceptably high," said Wells Fargo in its latest client report.
Diesel
Saudi Arabia's output cuts and buoyant refining margins have supported crude prices over the summer, as concerns over potential gasoil shortages continue to grow.
European diesel prices were close to levels not seen since the EU banned Russian diesel, helped by firmer crude and thin diesel supply that has seen margins rise above $40/b.
The market is tight, with backwardation of above $22/mt – a five-month high – as stocks are low in the ARA region and there is little supply slated for August.
Typically, stocks should rise in the region this time of year due to stockpiling ahead of the winter peak demand season.
Demand in the US also remains strong despite a rise in stocks, with deliveries at a nine-week high, according to EIA data released last Wednesday.
Meanwhile, Tropical Storm Idalia formed over the weekend and is forecast to land early this week along Florida's Gulf Coast as a powerful hurricane, having tracked across the eastern Gulf of Mexico.
Based on current models, Idalia is expected to miss the GOM's offshore oil and gas platforms while also landing too far east to threaten Louisiana's onshore refining, petrochemical and gas processing facilities. However, hurricane-force winds are likely to cause some disruption to oil and LNG shipping in the region.
