Crude advances after Saudi restraint sparks renewed supply fears
NEW YORK (Bloomberg) -- Crude rose after Saudi Arabian production cuts heightened concerns about tightening worldwide supplies.
Futures in New York advanced as much as 1.6% on Monday. Saudi Arabia curbed output last month, according to OPEC delegates, following signs that the kingdom couldn’t find enough buyers to justify elevated rates of production. Labor strikes resumed in the North Sea, fueling worries about an additional supply hitch. Meanwhile, the strengthening U.S. dollar threatened crude’s rally.
“Reports that the Saudi output in July had dropped, seemed to catch a bid in the market,” said Gene McGillian, manager of market research at Tradition Energy. “The dollar continues to climb and that’s starting to put some selling pressure on oil.”
The U.S. benchmark crude hasn’t recovered from a July retreat triggered by the U.S.-China trade spat that imperiled demand for energy in the world’s biggest economies. Despite the Saudi production cut, investors are waiting for clearer indications of the global supply situation after Russia’s largest oil producer said it has the capacity to continue lifting output.
“Are we going to continue to see strong demand growth and only the barrels that the Russians and Saudis put on really making up for what is lost through Iran and Venezuela?” said McGillian. “That continues to point towards a tight fundamental picture.”
West Texas Intermediate crude for September delivery rose $0.70 to $69.19/bbl on the New York Mercantile Exchange. Total volume traded was about 33% below the 100-day average.
Brent for October settlement added $0.42 to $73.63 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.62 premium to WTI for the same month.
After a weekend of claims by U.S. President Donald Trump that he has the upper hand in the trade war with China, Beijing said the nation is ready to endure the economic fallout. China is prepared for “protracted war” and doesn’t fear sacrificing short-term economic interests, according to an editorial in the nationalist Global Times.
Oil Market News
Gasoline futures rose 0.3% to $2.072/gallon. Saudi Arabia suspended diplomatic ties and new trade dealings with Canada in response to Canada’s call for the release of women’s rights activists.
