Crude Flat After Losing Today’s Gains On Demand Worries & Stronger USD

Oil prices are flat today after falling sharply on Monday as the market focussed on demand again. They were already off intraday peaks when the disappointing China PMI data was released but then took another leg down and the stronger dollar has seen them now little changed on the day. China is the largest oil importer. The USD index is about 0.2% higher.

• Brent is around $86.38/bbl, close to the low of $86.30. It reached a peak of $86.98 early in the session. WTI is also unchanged at $82.38 following a low of $82.29. Its high before the China data was $82.93.
• Markets are now looking at the demand outlook again with the Fed and US payrolls this week and the conflict in Israel/Gaza seemingly contained in that region for now. The main concern for oil is if the confrontation spreads to Iran.
• Demand fundamentals are looking soft and without the war premium, oil prices may fall further. Gasoline demand in the US is looking weak, China is reducing refining and the IEA expects a sharp drop in German demand, according to Bloomberg.
• Baltic shipping data is showing that the cost of oil transport from the Middle East to China has risen to its highest since June 22 and that most other routes have also seen costs rise, according to Bloomberg.
• Later the US Q3 employment cost index, August house prices, October MNI Chicago PMI and conference board survey are released. There is also euro area Q3 GDP and preliminary October CPI and ECB’s de Guindos speaks. Oil markets will now be looking to Wednesday’s Fed meeting (see MNI Fed Preview).