SlavkoSereda/iStock via Getty Images
Crude oil futures climbed Monday as U.S. offshore production gradually recovers from last week’s hurricane, with the market turning its attention to this week’s Federal Reserve meeting, and traders now see better than 50-50 odds for a 50 basis point rate cut.
“A 50 basis point rate cut would likely jolt most asset classes including oil, with WTI potentially maintaining some near-term bullish momentum that could carry it as high as the $73-$74 region, where we will expect a larger chart resistance,” Ritterbusch said, according to Dow Jones.
Shut-in Gulf of Mexico production has largely recovered, with 12% of oil output and 16% of gas output still offline Monday, according to the Bureau of Safety and Environmental Enforcement.
With increased bets on a 50-bp rate cut, traders shook off another round of downbeat economic data from China, which showed industrial production grew at the lowest pace since March, while retail sales and new home prices weakened further.
The data also indicated China massively raised crude oil stockpiles in August, suggesting that apparent oil demand fell below 12.5M bbl/day, a Y/Y drop of more than 15% and the weakest level since August 2022, ING analysts Warren Patterson and Ewa Manthey said, while indicating that crude oil inventories in China built at a pace of 3.2M bbl/day, the largest monthly build going back to 2015.
Front-month Nymex crude (CL1:COM) for October delivery finished +2.1% to $70.09/bbl, and front-month November Brent (CO1:COM) closed +1.6% to $72.75/bbl, the best settlement value for both benchmarks since September 3.
U.S. natural gas futures (NG1:COM) rose, supported by a recovery in LNG feedgas deliveries following Hurricane Francine as well as below-average builds in inventories, with the front-month October contract +2.9% to $2.373/MMBtu.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
Investors turned more bearish than ever on crude oil last week, according to data from the Intercontinental Exchange.
Negative sentiment swept oil markets so strongly that short positions on Brent crude overtook long positions for the first time, with ICE data showing short positions totaling 164,223 contracts and long positions totaling 151,543 contracts.
“This historic speculative selling pressure prompted a more than $10/bbl collapse in crude prices between late August and this past Tuesday,” Commodity Context analyst Rory Johnston wrote, according to Reuters.
