Oil fluctuates, U.S. data in focus

Oil prices swung between gains and losses on Monday after posting their biggest daily advance on Friday since August 1 and erased most of earlier weekly losses. Market players are looking ahead at key U.S. economic data due later this week to assess whether Fed might start scaling back its monetary easing program in September.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $106.03 per barrel at 7:10 GMT, up 0.06% on the day. Prices held in range between days high and low of $106.37 and $105.67 a barrel respectively. Light, sweet crude settled 2.3% higher on Friday, biggest daily advance since August 1, trimming its weekly decline to 0.64% after it surged 2.13% the preceding week.

Meanwhile on the ICE, Brent oil for delivery in October fell to $106.63 a barrel at 7:10 GMT, down 0.23% on the day. Futures ranged between days high and low of $106.94 and $106.38 a barrel respectively. The European benchmark surged 1.34% on Friday as positive China data fueled optimism over demand prospects and reduced Brents weekly fall to 0.65%.

China data

Upbeat China data on Thursday and Friday boosted global demand prospects, which allowed oil to regain some of its strength. The Chinese National Bureau of Statistics reported the country’s July Consumer Price Index remained steady with a 2.7% rise year-on-year, aligning with the previous month’s reading and below expectations for a 2.8% rise. On a monthly basis, consumer inflation met projections at a 0.1% increase. Year-on-year, China’s Producer Price Index (PPI) declined by 2.3%, above the anticipated 2.2% but outdoing the preceding period’s 2.7% fall.

Meanwhile, China’s industrial production surpassed analysts’ expectations for a 9.0% surge and rose by 9.7% in July, the biggest climb this year, beating June’s 8.9% gain. This offset a bit worse than expected retail sales, which rose by 13.2% in July, below forecasts for a 13.5% surge and last month’s 13.3% gain.

On Thursday, the Chinese General Administration of Customs reported the country’s exports rose by 5.1% in July after contracting 3.1% in June. Expectations for a 3% climb were exceeded. Meanwhile, imports also surpassed analysts’ projections for a 2.1% jump and surged 10.9% last month after a 0.7% decline in June. The Chinese trade surplus narrowed to $17.82 billion from $27.10 billion a month earlier and confounded economists’ forecasts for an increase to $27.20 billion. Crude oil imports hit a record 6.15 million barrels per day.

Ric Spooner, chief market analyst at Sydney-based CMC Markets, said for Reuters: “We still have to be cautious when we look at the Chinese data. We definitely see what appears to represent a steadying, but one months figures doesnt make a trend, so lets not get ahead of ourselves just yet. The quality of the numbers out of China dictates we should still maintain caution for a while”

Upcoming U.S. data

Market players focus shifted to the upcoming data from worlds top consumer in order to gauge the U.S. economys recovery pace and speculated whether the Federal Reserve will begin winding down its massive bond purchasing program. Julys Retail Sales are due on Tuesday and are expected to have advanced by 0.3%, compared to a 0.4% jump in the preceding month. Import prices are projected to have outdone the previous period both on annual and monthly basis. On Wednesday, producer prices (Producer Price Index) will likely show a slower advance than the preceding period both year-on-year and month-on-month. Thursdays consumer inflation (CPI) should have advanced by 0.2% compared to June and 2.0% from a year earlier. Industrial Production is expected to have surged 0.3%, marking the same advance as in June. Both of Fridays Building Permits and Housing Starts are projected to have advanced last month.

“In terms of the mood this morning, a lot of the focus is going to be on the U.S., there are several key data points due out this week which will be key in ascertaining if the Federal Reserve will start paring back stimulus next month,” said Spooner. “My view is that the possibility of a Federal Reserve pulling back stimulus is very real for September.”

Inventories data

Meanwhile, oil traders are also eyeing this weeks EIA oil inventories report. Crude reserves dropped in five out of the six weeks through August 2, but at a slower pace in the most recent ones. This, coupled with moving closer to the end of the driving season, led hedge funds to cut their net-long positions by 2.5% to 310 827 futures and options combined in the week ending August 6, the Commodity Futures Trading Commission said in its weekly report on Aug. 9.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg regarding EIAs report: “The market is taking a bit of a breather ahead of more data coming out in the next few days. The U.S. inventory draw down figures have been giving a few mixed signals, so people will be looking at the EIA numbers for more direction.”

Meanwhile, oil prices were also pressured amid easing concern over global supply, which has been building a premium over the past weeks. Saudi Arabia, OPECs leading producer, increased its output in July, while Libyas largest crude export terminal resumed activity.

Another OPEC member, Iran, is also expected to boost production in the near future. Bijan Namdar Zanganeh, a former Iranian Oil Minister, was nominated by the newly elected President Hassan Rohani to re-assume the post. He said that his first action will be to bring back the countrys output to 2005 levels, when the country wasnt sanctioned by the U.S., U.N. and E.U. due to its nuclear program. With 4 million barrels per day pumped out in 2005, Iran was OPECs second biggest producer. In July, the country fell to the sixth place with an output of 2.56 million bpd.