Crude see-saws as supply crunch muted by impending demand drop

NEW YORK (Bloomberg) -- Oil capped recent gains as international supply concerns were overshadowed by a looming demand drop.

Futures advanced as much as 1.1% in New York on Monday. Iranian exports of crude and a key byproduct plunged to a 2 1/2-year low as looming U.S. sanctions curbed purchases from the Islamic Republic, according to ship-tracking data compiled by Bloomberg. At the same time, American refiners are about to undertake seasonal mechanical work that requires some equipment to be idled, curtailing crude processing.

“It feels like the market is a little hesitant,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto. “It doesn’t feel like there is a ton of bullish enthusiasm in the energy sector.”

The U.S. benchmark crude has dipped about 1% this month as an escalating trade war between the U.S. and China imperiled demand growth. Oil markets have see-sawed as trade-war gloom was tempered by supply threats from Iran, Venezuela and other major producing nations.

West Texas Intermediate for October delivery was little changed at $69.04/bbl at 11:20 a.m. on the New York Mercantile Exchange. Total volume traded was about 21% below the 100-day average.

Brent for November settlement climbed 68 cents to $78.77 on the ICE Futures Europe exchange. The global benchmark crude traded at a $9.47 premium to WTI for the same month.

A measure of oil market volatility rose to the highest level since mid-July.

The Bloomberg Dollar Spot Index fell as much as 0.4% on Monday.

Meanwhile, Russian Energy Minister Alexander Novak and Saudi Arabian Energy Minister Khalid al-Falih met in Moscow Saturday and confirmed their “commitment to stability in the market and readiness to react quickly to changes in market conditions.”

The historic supply deal between Saudi Arabia, Russia and other major producers reached in late 2016 needs to be made permanent, Mohammad Barkindo, OPEC secretary-general, said Sunday in Dubai.