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U.S. crude futures remain near 6-yr lows, as oversupply concerns weigh
WTI crude fell below $42 on Monday, while brent crude dipped below $49
On the New York Mercantile Exchange, WTI crude for October delivery traded between $42.27 and $43.20 a barrel, before settling at $42.32, down 0.78 or 1.82% on the session. Last week, Texas Long Sweet futures fell more than 2% to its lowest level since 2009, amid a continuing gulf in supply and demand levels worldwide.
On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $48.36 and $49.44 a barrel, before closing at $48.70, down 0.49 or 1.00% on the day. The spread between the international and U.S. benchmarks of crude stood at $6.38, below Friday's level of $6.58 at the close.
Crude prices unexpectedly fell in the final hour of Monday's trade upon the expiration of September options. In recent weeks, September crude options had fallen approximately $20 off their high from June trading and $10 from their peak in July as oil prices suffered its second severe downturn on the calendar year. A number of traders expected to see a spike in call options on Monday before expiry. Investors now await the expiration of September crude futures on Wednesday.
As crude prices continue to linger at its lowest levels in years, investors have expressed little optimism that the current supply-demand imbalance can be corrected in the short-term. Last week, the U.S. Energy Information Administration (EIA) lowered supply growth estimates for the remainder of the year to 650,000 barrels per day, below prior forecasts of a 750,000 bpd. The Energy Department's supply forecasts still exceed demand growth expectations of 400,000 bpd, which remained unchanged.
OPEC, meanwhile, increased its crude production by 100,000 bpd in July to 31.5 million bpd, even as Saudi Arabian output fell mildly. Last November, OPEC triggered a prolonged battle for market share with the U.S. by keeping its production ceiling above 30 million bpd.
By next year, the EIA expects U.S. crude output to decline by 400,000 bpd from prior forecasts of a 150,000 bpd reduction. In terms of demand growth, the EIA anticipates increased growth of 190,000 bpd, up from previous estimates of 130,000 bpd. Crude prices have fallen sharply by 60% since peaking above $100 a barrel last summer, as supply continues to outstrip demand.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.25% to an intraday high of 96.84 in U.S. afternoon trading. The dollar moved broadly higher after the National Association of Home Builders said its Housing Market Index for July rose modestly for the month, in line with analysts' expectations.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Wall Street ends up after bullish housing data
© Reuters. Traders, company executives and guests gather for the IPO of Houlihan Lokey, Inc., on the floor of NYSE
The Dow Jones industrial average (DJI) rose 67.92 points, or 0.39 percent, to 17,545.32, the S&P 500 (SPX) gained 10.92 points, or 0.52 percent, to 2,102.46 and the Nasdaq Composite (IXIC) added 43.46 points, or 0.86 percent, to 5,091.70.
Germany's Schaeuble gives strong backing to Greek bailout
© Reuters. German Finance Minister Schaeuble speaks during the session of Germany's parliament, the Bundestag, in Berlin
BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble said on Monday he had no qualms about urging fellow lawmakers to approve a new bailout for Greece in a parliamentary vote on Wednesday, citing a dramatic change in the Greek government's readiness to reform.
In a robust endorsement that could help Chancellor Angela Merkel's grand coalition win broad backing for the bailout, Schaeuble said he was confident that the International Monetary Fund, whose imprimatur many lawmakers see as guaranteeing rigorous implementation of budgetary and reform targets, would take part.
Schaeuble argued last month that Greece should consider a "timeout" from the euro zone, drawing criticism from some euro zone partners and solidifying his credentials among bailout skeptics in his party as an opponent of leniency.
"I can argue with full conviction, partly because I haven't taken this decision lightly myself ... that the right thing to do is to vote for this," Schaeuble said in an interview with the German public broadcaster ZDF.
Schaeuble called existing loan terms to Greece "very generous". He said steps could be taken to reassure the IMF on the sustainability of Greece's debts and ensure its involvement.
"I am very sure that we will come to a common assessment and I am also sure that the IMF, whose role we have described as indispensable, will take part in this program."
Asked if a Greek exit from the euro was now off the table, Schaeuble said this was up to Greece.
"If Greece does everything that we have agreed, then this program is designed over the next three years to bring Greece back onto a sustainable path," he said. "Greece should then be able to fund itself on the financial markets without guarantees from the European rescue fund."
Earlier, sources involved in party talks told Reuters that conservative lawmakers largely supported the new bailout plan but that top party officials wanted to be sure the IMF would take part - something that Merkel tried to reassure them of on Sunday.
The Bundestag is due to vote on the 86 billion euro ($95 billion) aid package on Wednesday.
Germany's approval of the deal is not in doubt because of the support of parties such as the Social Democrats, Merkel's junior coalition partner, and the opposition Greens.
But a rebellion by a large number of lawmakers from her Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), would be a blow to her authority.
Last month, a record 65 lawmakers from Merkel's conservative camp broke ranks and refused to back negotiations on the bailout. The daily Bild estimated that up to 120 CDU and CSU members out of 311 might refuse to back the deal now agreed.
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