Oil stability in light of tight market competition with recession fears

Oil pumping cranes at the Vaca Muerta oil and shale gas field in the Patagonian province of Neuquén, Argentina, Jan. 21, 2019. REUTERS/Agustin Markarian

LONDON (Reuters) – Oil prices were largely flat on Monday as a relatively tight global supply picture rivaled fears of a recession and a stronger dollar.

Brent crude futures for October were down 34 cents, or 0.3 percent, at $96.38 a barrel by 1105 GMT.

US West Texas Intermediate crude for September delivery – due to expire on Monday – was down 42 cents, or 0.4%, at $90.35. The most active October contract was down 27 cents, or 0.3%, at $90.17.

Ole Hansen, head of commodity strategy at Saxo Bank, said higher natural gas prices, exacerbated by lower supply from Russia, were boosting oil demand.

Brent crude reached around $140 a barrel in early March but has since fallen back, with inflation hitting multi-decade highs.

“While funds continued to sell crude oil in anticipation of an economic slowdown, the refined products market was sending another signal with refinery margins rising again, in part due to higher gas prices making refined alternatives, such as diesel, look cheap,” Hansen said.

Supply around the world remains relatively limited, with a pipeline operator that supplies about 1% of the world’s oil through Russia saying it will cut production again due to damaged equipment. Read more

Meanwhile, the dollar index rose to a five-week high on Monday. A strong US currency is generally bearish for the market because most of the global oil trade is done in dollars.

Investors will also be paying close attention to comments made by Federal Reserve Chair Jerome Powell when he addresses the annual Global Central Banking Conference in Jackson Hole, Wyoming, on Friday.

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Meanwhile, pressured prices were fears of slowing fuel demand in China, the world’s largest oil importer, due in part to the energy crisis in the southwest. Read more

Beijing lowered its benchmark lending rate on Monday as part of measures to revive an economy that has been hobbled by the real estate crisis and a resurgence of COVID-19 cases. Read more

Meanwhile, the White House said Sunday that the leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, which could allow sanctioned Iranian oil to return to global markets. Read more

(Reporting by Noah Browning) Additional reporting by Yuka Obayashi Editing by Jason Neely and David Goodman

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