Oil down 2nd day in row on China, Fed; U.S. stockpile data awaited
Investing.com -- Oil prices slid for a second day in a row, with U.S. crude settling beneath the key $80 per barrel support, on worries over the economic stalling in China and the potential for more rate hikes by the Federal Reserve.
The bull fervor over Saudi-Russian output cuts took a backseat, but helped put a floor under the market.
“There's always been a risk of U.S. rates remaining higher for longer, while China's recovery has been sluggish for months, as has their response to it,” said Craig Erlam, analyst at online trading platform OANDA.
“We need to see a significant change in the trend of the data to seriously change the outlook for crude and we haven't seen that. It may come over the next month or so but for now, we just appear to have seen crude move into a higher range between $80-$90.”
The most-active October contract on the New York Mercantile Exchange settled down 48 cents, or 0.6%, at $79.64 per barrel — below the key $80 mark. WTI hit a session low of $79.47 earlier. The U.S. crude benchmark is down some 2% week-to-date, extending last week’s 2.3% slide after rallying nearly 20% over seven previous weeks.
Brent settled down 43 cents, or 0.5%, at $84.03 per barrel. The global crude benchmark was down about 1% on the week, extending last week’s 3% drop after a seven-week rally that gave oil bulls an 18% return.
The downside in crude has, however, been limited by data from oil cargo tracker Kpler that indicated a dramatic drop in crude exports from the Organization of the Petroleum Exporting Countries and their allies in the first 15 days of August.
The output cuts from the so-called OPEC+ alliance, led largely by the Saudis and Russians, could take away some 67.5 million barrels from the market over the next 45 days, energy markets advisory HFI Research said at the end of last week, summing up its own calculations of Kpler data.
China’s economic woes weigh
But some analysts said crude was expected to stay volatile through the week and possibly end lower on weaker technicals, combined with the “China-bear” story and expectations for a hawkish Fed at Jackson Hole.
China's renewed economic weakness has raised questions over whether its oil demand can remain resilient.
Investors will particularly be looking out for a speech this week by Fed Chair Jerome Powell on how the central bank envisages interest rates going forth.
Jackson Hole could provide rates guidance
Powell’s speech, set for 10:05 am ET on Friday, comes after last week’s minutes of the central bank’s July meeting showed that most policymakers are still concerned about upside risks to inflation, indicating that further rate hikes cannot be ruled out. For now though, traders on the money market see an 89% chance of the Fed holding rates at current levels at its September meeting, according to Investing.com's fed rate monitor tool.
In Tuesday’s market, traders’ attention was also on forthcoming weekly data on U.S. oil stockpiles.
API inventories due
The American Petroleum Institute, or API, will release at approximately 16:30 ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week Aug 18. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.
For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 2.299 million barrels, versus the 5.96M barrel reduction reported during the week to Aug 11.
On the gasoline inventory front, the consensus is for a build of 0.436M barrels over the 0.261M-barrel decline in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With distillate stockpiles, the expectation is for a climb of 0.095M barrels versus the prior week’s gain of 0.296M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
(Additional reporting by Ambar Warrick in Singapore and Peter Nurse in London)
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