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Oil rebounded as investor focus returned to near-term supply risks, while broader financial markets steadied after being rattled by Turkey’s deepening economic turmoil.
Futures in New York added 0.3 percent, recouping some of Monday’s losses. U.S. crude stockpiles probably fell last week for a second time, according to a Bloomberg survey of analysts. While a plunge in the Turkish lira from the financial crisis has spilled over to other emerging countries, commodity markets so far have been largely spared from the selloff. Asian stocks mostly steadied, with relative calm seen in most developed markets overnight.
Oil has traded mostly within a small range below $70 a barrel this month as traders weigh whether increased production from OPEC will be enough to offset potential losses from Iran, with the U.S. set to impose sanctions on the Persian Gulf nation’s oil sales in early November. Investors are also watching to see if a trade conflict between America and China escalates to imperil global economic growth, reducing energy demand. China is said to plan to delay some U.S. oil purchases.
“Oil markets are more driven by supply risks right now,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “But Turkey’s collapse could suppress gains as it could result in a stronger dollar. Meanwhile, more volatility is expected, with the U.S. inventory data due and geopolitical risks lurking.”
West Texas Intermediate crude for September delivery traded at $67.43 a barrel on the New York Mercantile Exchange, up 23 cents at 2:31 p.m. in Singapore. The contract fell 43 cents to $67.20 on Monday. Total volume traded was about 51 percent below the 100-day average.
Brent for October settlement added 24 cents, or 0.3 percent, to $72.85 a barrel on the London-based ICE Futures Europe exchange. Prices on Monday declined 20 cents to $72.61. The global benchmark traded at a $6.05 premium to WTI for the same month.
Turkey Meltdown
Futures for September delivery traded 1.3 percent higher at 522.3 yuan a barrel on the Shanghai International Energy Exchange. The contract gained 0.5 percent on Monday.
Commodity markets have had a more muted reaction to Turkey’s meltdown even as the impact rippled across emerging markets after the Turkish lira plunged. In broader financial markets, equities climbed in Japan, Australia and South Korea, while those in China and Hong Kong traded lower. The MSCI Emerging Market Index was little changed after falling to the lowest in a year on Monday.
The dollar may continue to strengthen versus the euro as European Union members have a large exposure to Turkey, Samsung Futures’ Kim said. In the long run, Turkey’s financial crisis may hurt energy demand if it spreads to other emerging markets due to a slowdown in economic growth, he said. Commodities priced in the dollar also tend to fall when the greenback rises.
See also: Threat of Contagion in Emerging Markets Deepens Commodity Risk
In the U.S., crude inventories are forecast to have fallen by 2.5 million barrels in the week ended Aug. 10, according to the Bloomberg survey before government data due Wednesday. Stockpiles in the nation’s storage hub in Cushing, Oklahoma, probably increased 500,000 barrels last week.
Other oil-market news:
OPEC crude production rose in July, despite sliding output in Libya, Iran and Saudi Arabia, the group said in its monthly oil market report, citing secondary source figures. Canadian heavy oil producers are facing a new barrier to marketing their crude. New rules limiting the amount of sulfur allowed in shipping fuel is expected to cut demand for both high-sulfur fuel oil and the sour crude that yields it. The CBOE/Nymex Oil Volatility Index rose 4.7 percent in the previous two sessions, the biggest increase since July 31. China’s daily crude processing fell to about 12 million barrels a day in July, with output declining to the lowest since 2009, according to Bloomberg calculations based on National Bureau of Statistics data.
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