Oil futures: Crude rebounds from lows amid conflicting price signals
Quantum Commodity Intelligence - Crude oil futures Monday were trading higher after recovering from earlier lows, with the market tied between demand concerns on the one side as China battles to contain its latest Covid outbreak amid widespread lockdowns, while potential supply shortfalls provided a counter.
Front-month November ICE Brent futures were trading at $94.35/barrel (1930 GMT), compared to the day's low of $91.21 and Friday's settle of $92.84/b.
At the same time, October NYMEX WTI was trading $88.13/b versus Friday's settle of $86.79/b.
Personal mobility in and around China's largest cities slumped by around 20% in the first week of September compared with the last week of August, sparking demand concerns with no sign of the world's largest crude importer planning to lift restrictions anytime soon.
According to data from search engine Baidu, personal mobility on a seven-day rolling average is now at the lowest level since the end of May ahead of the mid-Autumn festival – normally a time of mass movement as people head home.
As of last week, approximately 65 million people in China were under lockdown despite just 1,248 new cases of domestic transmission being reported Sunday.
In the US and Europe, recessionary fears continue to cast a shadow over energy markets.
"Oil prices rebounded late in the week after collapsing more than 5% on Wednesday on renewed global growth concerns. With policymakers worldwide still hawkish on interest rates, most notably in the US, and China locking down major cities in its zero-tolerance fight against Covid, the demand outlook is weakening," said Ed Moya, senior market analyst at brokerage Oanda.
However, supply concerns that helped boost prices in the latter part of last week were seen lending some support, particularly the impact of Russian price caps and tighter sanctions.
Late Friday, the US issued preliminary guidance laying out the plan to impose price caps on Russian seaborne oil exports to destinations outside North America and Europe after 5 December.
On Sunday, Treasury Secretary Janet Yellen told CNN Americans could experience a spike in gasoline prices in the winter when the European Union significantly cuts back on buying Russian oil.
Meanwhile, OPEC+ producers may consider further production cuts to counter the drop in Chinese oil demand, with Saudi Arabia potentially considering a short-term unilateral cut.
JP Morgan said last week that the OPEC+ group may need to cut production by 1 million bpd to "stem the downward momentum in prices and realign physical and paper markets which appear disconnected."
Most members struggle with existing targets, as output from the 19 countries with quotas under the OPEC+ agreement fell 3.61 million bpd short of the target last month — the widest gap in the alliance's five-year history.
Dutch TTF futures for Oct22 slumped 8% to around €190/MWh Monday, more than 40% down from the record €348/MWh traded in late August, retreating to a one-month low.
Meanwhile, the North Atlantic storm season remains quiet, with the NHC watching just one system off the West Coast of Africa. It is forecast to move through the Eastern Atlantic this week but is given just a 20% chance for tropical development over the next five days.
North American drilling activity decreased slightly in the first full week of September, having registered small increases during the previous two weeks, oilfield services firm Baker Hughes reported.
The overall weekly rig count was down by just one unit to 759, but the number of units dedicated to crude dropped by four to 591.
