Futures Movers: Oil pulls back after posting a monthly climb, with supply outlook in focus

by | Oct 2, 2023 | Stock Market

Oil futures headed lower on Monday, easing back after posting monthly and quarterly gains. Analysts warned of “overbought” conditions in the market after oil prices touched their highest levels of the year in recent days, but expectations for a further tightening of supply continue to provide some support for prices.

Price action
West Texas Intermediate crude for November delivery

fell $1.45, or 1.6%, to $89.34 a barrel on the New York Mercantile Exchange. On Friday, the front-month contract tallied a nearly 9% rise for September and climbed by almost 29% for the third quarter.

December Brent crude

the global benchmark, was down35 cents, or 0.4%, at $91.85 a barrel on ICE Futures Europe.

November gasoline
fell 0.1% to $2.3979 a gallon, while November heating oil
was down 2.1% at $3.232 a gallon.

Natural gas for November delivery
lost 2.7% to $2.849 per million British thermal units.

Market drivers Oil has had a really good run this summer on the back of demand holding up, and also showing signs of strength, while supply remains somewhat constrained, Colin Cieszynski, chief market strategist at SIA Wealth management, told MarketWatch. “That being said, it has also become technically overbought on several measures, and a correction appears to be starting with an overnight bounce fading and the price falling under its own weight for the moment,” he said. WTI and Brent jumped by more than 25% in the third quarter, with the U.S. benchmark last week hitting its highest close in nearly 13 months. Brent last week traded at its highest since November. Traders this week will be paying attention to a meeting of the OPEC+ Joint Ministerial Monitoring Committee, or JMMC, on Wednesday. The panel is made up of oil ministers from members of the Organization of the Petroleum Exporting Countries and its Russia-led allies and has the authority to call for a full OPEC+ meeting if it decides one is needed. “The market will be eager to see if there are any signs of a change in the group’s output policy, given the recent strength in the market. We do not believe that the group will change its output policy,” Warren Patterson and Ewa Manthey, commodity analysts at ING, said in a note. Crude has rallied over the past four months, with tightening supplies taking center stage. Analysts have cited Saudi Arabia’s June decision to implement a voluntary production cut of 1 million barrels a day beginning in July — a reduction that was recently extended through the end of the year — as the primary driver for the rally. The ING analysts held out the possibility, however, that Saudi Arabia could signal it’s ready to ease its additional cut after China’s official purchasing managers index reading for September indicated the first expansion in manufacturing activity in six months. They noted Saudi Arabia has cited uncertainty over China’s demand outlook as a factor in its decision to cut production. The data “will provide some confidence with China’s manufacturing PMI returning to expansion territory in September for the first time since March, whilst the nonmanufacturing PMI remained in expansion territory over the month,” they wrote. For now, the oil market would need to see something significant happen on either the supply or demand side to see a change in sentiment that would spark a breakout in prices in either direction, said Cieszynski. “For supply, the OPEC and related meetings could have …

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