OIL FUTURES: Crude moves higher amid weaker US dollar, steep equity rally

Crude oil futures settled higher July 19, propelled by sharply higher equity markets and a weaker dollar.

NYMEX August WTI settled $1.62 higher at $104.22/b and ICE September Brent climbed $1.08 to $107.35/b.

Crude futures, which had been trending lower overnight, moved steadily higher in US trading as the dollar moved lower for a third straight session. The ICE US Dollar Index fell to 106.7 in afternoon trading from 107.37 the session prior and was on pace to close at a two-week low.

Upward pressure on the US dollar, which was testing 20-year highs last week, has cooled in recent days as recession fears have eased amid a string of strong second quarter earnings reports. Enthusiasm in US equity markets, which were on pace to close nearly 3% July 19, added further support to oil prices.

NYMEX August RBOB settled 4.32 cents higher at $3.3075/gal while August ULSD declined 2.87 cents to $3.6268/gal.

China's gasoil, gasoline and jet fuel exports in June dropped to a seven-year low of 1.58 million mt, or 426,000 b/d, despite new quota allocations, data released July 18 by the General Administration of Customs showed.

The June volumes represented a 66.7% year-on-year slump and a 10.7% month-on-month decline, far below the market's estimation of up to 3 million mt exports. GAC data showed that the previous export low was 899,000 mt in February 2015.

Market analysts remained optimistic about China's recovering demand that could ease off an inventory pressure, offsetting the need to export more barrels to international markets.

High temperatures during summer have been pushing up demand for air conditioning, raising expectations that more gasoline and gasoil will be burned as retail prices fell recently, they added.

Meanwhile, Europe is now counting down the hours until the Nord Stream gas pipeline is scheduled to end its planned annual maintenance shutdown on July 21, with the gas market on tenterhooks over whether the pipeline will resume operations.

Morgan Stanley said July 19 in a note that July 21 was "potentially shaping up as the most important/anticipated risk event for European (and perhaps global) risk markets over the summer."

The key pipeline from Russia to Germany was already flowing gas at only 40% of capacity before its planned 10-day maintenance started on July 11, which reduced flow to zero.

"The underlying supply/demand imbalance is as tight as ever," OANDA senior market analyst Jeffrey Halley said in a note, adding: "Risks remained skewed to the upside if Russian gas does not start flowing back to Europe at the end of this week."

Libya flows resume

Libya's National Oil Corp. expects five tankers to load crude from oil terminals over July 19-21, after the new management of the state-owned company lifted force majeure following a nearly three-month closure.

"Preparations are now underway to export crude oil after the lifting of force majeure on terminals and oil fields," NOC said in a July 19 statement.

A tanker is scheduled to arrive at the Zueitina terminal to load 1 million barrels of Abu Attifel crude July 20, while a tanker will stop at the Es Sider terminal over July 19-20, the statement said. Two other tankers will arrive at the Ras Lanuf terminal over July 20-21, while another tanker will load 600,000 barrels of Brega crude during the period.

Libya, which replaced NOC's board July 14, is loading its first cargo of condensate since the lifting of force majeure from all ports and fields, though the legitimacy of the company's new leadership remains contested.