Oil futures: Crude rebounds from lows, EIA increases Brent forecast
Quantum Commodity Intelligence – Crude oil futures Tuesday moved back into positive territory late in the session to end near the day's highs, as wider concerns over the global economy vied with a perceived tightening on the supply side for much of the day.
Oct23 ICE Brent futures were trading at $86.10/b (1950 GMT), compared to the day's range of $83.32-$86.24/b and Monday's settle of $85.34/b.
At the same time Sep23 NYMEX WTI was trading $82.87/b, versus Tuesday's close of $81.94/b.
However, prices rebounded after a monthly report from the US Energy Information Administration said it sees Brent crude oil prices averaging $86/b in the 2H of 2023, up around $7b from the previous forecast, while US GDP is forecast to increase 1.9% in 2023, up from a previous forecast of 1.5%.
Prices were lower for much of the session after data released from China revealed oil imports dropped 10.3 million bpd in July, down almost 19% from June, although still up by around 17% from a year earlier.
But total exports from China fell by 14.5% in July from a year ago, falling well short of what analysts had expected, and the steepest year-on-year decline since February 2020.
Prices had also struggled during the early part of the week on rising expectations that the US will see a recession by the end of 2024, with a Bloomberg investor poll showing two-thirds of 410 respondents expect a recession by the end of next year and 20% see one by the end of this year.
A further rate hike from the Federal Reserve also remains a concern, with this week's July CPI data seen as critical for market sentiment to provide clues about Fed's further policy path.
Banks
Adding to US woes, Moody's downgraded some US regional banks and said it may downgrade some of the nation's biggest lenders. The agency reduced ratings of 10 smaller banks by one notch and placed national banks, including Bank of New York Mellon and Bancorp, on review.
But oil markets continued to find support after Saudi said it would extend cuts for at least another month into September while increasing OSPs again also added to a firmer outlook.
"Saudi Arabia's commitment to supporting oil prices has been evident in recent months. The Kingdom's efforts to rebalance global oil markets amid concerns regarding the global growth outlook and upside supply surprises appear to be paying off," said Goldman Sachs in a client note.
Saudi's government Tuesday reaffirmed its support for 'precautionary measures' by OPEC+, possibly signalling Riyadh is willing to extend the reduced production into Q4 if deemed necessary
Meanwhile, tensions around the Black Sea remained at elevated levels after a second maritime drone attack struck an oil tanker over the weekend, with the route accounting for most of the regional grain and over 15% of Russian oil exports.
While significantly higher insurance and shipping costs are likely, commodity analyst Giovanni Staunovo of UBS noted: "Prices tend to only react when there is a disruption. At the moment, the oil is still flowing."
