Oil and Gas Weighed Down by China

By FX Empire Analyst - Barry Norman
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WTI crude oil prices have fallen by more than 0.80 percent in international market on resumed concern from Euro-zone and talk over China-Japan trade dispute. German Chancellor Angel Merkel and French President Francois Holland underlined Franco-German disagreement yesterday as they clashed on timetable to introduce the joint oversight of euro-zone banking sector. Ahead of Spain stress test result before the weekend and completion of Greece budget cut plan, the shared currency Euro is likely to remain under pressure.

On the other side, China manufacturing and retailers are less optimistic about increasing sales, as reported by US Beige book.

Most of the Asian equities are trading in a negative territory and supporting a down side move in oil prices also. IFO numbers from German are likely to come in a blend whereas US Dallas fed manufacturing index may remain under pressure. Talk on releasing strategic reserve in order to decline gasoline prices in US, before the presidential election is another factor to keep oil prices under pressure. Expect oil futures prices to continue its bearish move in today trading session.

NYMEX crude oil rose for a second straight day, on supply concerns & economic optimism fueled a rebound from a 7% slide earlier in the week. Brent crude topped $111 per barrel but posted a 4.5% drop on the week due to a 3-day rout that pushed prices from $116 to $108.

Speculators raised their net long futures and options positions in US crude oil by 18,006 contracts to 243,303 in the week to Tuesday. The net long position has risen by 65% in past 3-months, as per CFTC data.

China's crude oil imports fell to a 22-month low to 18.4mn tons in month of August, equivalent to 4.35mn barrels a day, down 12.6% a year ago.

This morning  natural gas prices are trading above $2.88/MMBTU with gain of more than 0.20 percent in Globex electronic platform. As per National Hurricane Center, tropical storm Miriam has reached the level of Hurricane near to PADD IV region accounts for more gas production in US. MDA Earth Sat, another leading weather forecaster, said the 6 to 10-day forecast period would see cooler temperatures. Thus, speculation of rising demand for space heating purpose may support gas prices to trade on higher side.

The number of rigs actively exploring for oil and natural gas in the US dropped last week by 5 to 1,859. 1,402 rigs were explored for oil and 454 were searching for gas while 3 were listed as miscellaneous, as per oil-field services company Baker Hughes Inc.

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