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Oil futures on Monday marked a third consecutive session gain, a day ahead of the expiration of the September contracts, as U.S. sanctions on Iran contributed to concerns over tighter global oil supplies.
Emerging-market and Chinese demand worries had rippled through the market last week, sending oil prices down for a third week in a row.
A surprise jump in U.S. crude inventories last week also nicked prices, while overall strength in the U.S. dollar underlined concerns about global energy demand, sending prices lower. Still, late-week relief came the bulls’ way on news the U.S. and China prepared to resume trade talks, though expectations for a breakthrough remained low.
West Texas Intermediate crude for September delivery CLU8, +0.77% on the New York Mercantile Exchange rose 52 cents, or 0.8%, to settle at $66.43 a barrel following gains over the past two sessions. The contract, which expires at the end of Tuesday’s session, logged a 2.5% decline last week.
Phil Flynn, senior market analyst at Price Futures Group, said traders are focusing on the expiration of the September contract, given the “big spread” in prices between that contract and the soon-to-be front-month October futures contract CLV8, +0.25% which settled Monday at $65.42. “One would expect that either September is going to sell off into the expiration or October should rally,” he said.
The global benchmark, October Brent crude LCOV8, +0.46% climbed 38 cents, or 0.5%, to $72.21 a barrel on the ICE Futures Europe exchange. Brent logged a 1.3% weekly loss through Friday.
Fears of broader damage to emerging markets as a result of Turkey’s currency crisis sent shock waves through commodity markets last week, led by a selloff for industrial metals. The ICE U.S. Dollar Index DXY, -0.24% which measures the U.S. unit against a basket of six major rivals, hit a 14-month high last week on haven-related demand.
The emerging-market worries were compounded by signs of slower growth in China, where the trade dispute with the U.S. has dimmed the economic outlook for the world’s second-largest economy and its thirst for oil.
On the supply side, U.S. sanctions on Iran specifically targeting oil are due to come into force in November, and analysts said it remains unclear exactly what volume of Iranian oil would be removed from the market.
Market observers, including Giovanni Staunovo, a commodities analyst at UBS Wealth Management, have speculated that Europe, Japan and South Korea will cut Iranian imports, while India has indicated it intends to halve its imports. Turkey and China are wild cards, but even if they hold steady, the impact of lost Iran oil on the market would amount to 1 million to 1.5 million barrels a day, as expected, he said.
Meanwhile, the Joint Ministerial Monitoring Committee teleconference scheduled for Monday was reportedly delayed to Aug. 27 because of the Eid al-Adha Islamic holiday and the annual Islamic pilgrimage to Mecca known as the Hajj.
The countries that make up the JMMC are expected to provide an update on compliance among the Organization of the Petroleum Exporting Countries and oil producers, led by Russia, with the oil production-cut agreement implemented in January 2017. In a meeting in late June, the oil producers had agreed to rein in output cuts, essentially lifting production to help make up for an expected shortfall in global supplies.
Analysts and investors will also be closely watching the Energy Information Administration’s U.S. stocks data on Wednesday, after last week’s reading showed a counter-seasonal rise in stocks.
Rounding out action on Nymex, September natural gas NGU18, +0.17% ended down 0.2% at $2.941 per million British thermal units. September gasoline RBU8, +1.64% added 1.7% to $2.015 a gallon and September heating oil HOU8, +0.62% rose 0.7% to $2.114 a gallon.
—Sarah McFarlane contributed to this article.
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