Oil futures fell to fresh five-week lows Monday, as the market remained concerned about a weakening Chinese economy and its potential drag on demand, while paying little attention to the turmoil in U.S. politics.
China’s central bank unexpectedly cut a key interest rate in an effort to spark the country’s sluggish economy Monday, but the move seemed only to help confirm the market’s worries.
Analysts at ING also noted upside risks from wildfires in Alberta, which are threatening nearly 400K bbl/day of Canadian oil supply, and high geopolitical tensions after Israel conducted a strike on Houthi rebels in Yemen in response to a drone attack on Tel Aviv.
Front-month Nymex crude (CL1:COM) for August delivery closed -0.4% to $79.78/bbl, the sixth loss in seven sessions and the lowest settlement value since June 1, and front-month September Brent crude (CO1:COM) finished -0.3% to $82.40/bbl.
Meanwhile, front-month August Nymex natural gas (NG1:COM) scored its third straight daily gain, +5.8% to $2.251/MMBtu, helped by reports that Freeport LNG, the second largest U.S. liquefied natural gas exporter, has resumed shipments after shutting operations ahead of Hurricane Beryl.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
The oil market showed little reaction to President Biden’s withdrawal from the race for re-election, but Vice President Kamala Harris is seen as more aggressive than Biden on climate and energy, stances that will now receive much greater scrutiny as she pursues the presidency.
Before joining the Biden-Harris ticket in 2020, she advocated a ban on fracking and was one of the original sponsors of the Green New Deal resolution, positions that could hurt her in places such as the battleground state of Pennsylvania, where natural gas production is an important industry.
As California attorney general previously, Harris brought lawsuits against fossil fuel companies, prosecuted a pipeline company over an oil leak, and investigated Exxon Mobil for misleading the public about climate change.
“Our expectations are that we should find a bottom here as the global market is tightening,” Price Futures Group’s Phil Flynn said, but “until we get a clearer direction on which way the country is going to go, the market is looking at a Trump presidency as a potential negative to oil prices as he will allow increased oil and gas production.”
