Crude rally fizzles as market consolidates ahead of key US Federal Reserve meeting

Crude oil futures settled lower Aug. 26 as traders booked profits ahead of the US Federal Reserve's Jackson Hole Symposium.

NYMEX October WTI settled down 94 cents at $67.42/b and ICE October Brent declined $1.12 to settle at $71.13/b.

"We are seeing a repeat of Wednesday morning's movement -- some profit-taking and uncertainties over the gathering optimism that the Federal Reserve will defer its tapering plan in view of the delta variant denting on economic recovery," said Vandana Hari, CEO of Vanda Insights, on Aug. 26.

Investors are looking to the Jackson Hole Symposium, starting on Aug. 26, for clarity on the US Federal Reserve's position on the tapering of its asset purchase program. Most market watchers are expecting Federal Reserve Chairman Jerome Powell to adopt a more hawkish stance at the meeting and announce a start of tapering in September, a move likely to herald rising interest rates and a stronger US dollar -- both bearish for energy prices.

NYMEX September RBOB moved 4.54 cents lower to $2.2554/gal and September ULSD gave up 3.5 cents to settle at $2.0832/gal.

"Crude prices eased slightly ahead of a make-or-break moment for the US dollar, Fed Chair Powell's expected pivot towards tapering," OANDA senior market analyst Ed Moya said. "The dollar could remain supported heading towards Powell's [Aug. 27] speech and that might keep all commodities slightly weaker."

The ICE US Dollar Index rallied to 93.059 in afternoon trading, on pace to snap three consecutive lower sessions.

The downward price pressure likely had a technical aspect as well. Brent and WTI futures settled Aug. 26 up 11% and 10%, respectively, from their most recent lows seen Aug. 20, a rally that likely prompted some traders to book profits amid uncertain near-term outlooks.

While the spread of the coronavirus delta variant continues to cloud outlooks, demand indicators in most of the world's biggest oil-consuming countries improved or held steady in the week to Aug. 21, supporting emerging signs that the impact of the recent outbreaks in top Asian economies may be more limited than initially expected.

Global mobility, a key proxy for gasoline and diesel demand, remains around 13% below pre-COVID levels in the world's top 13 oil users excluding China, according to adjusted data reported by Google, down from a post-pandemic high of 11.8% on July 21.

The average mobility in Asia's top oil consumers outside China improved over the week despite new restrictions in Japan to curb rising infections.

Tropical Depression Nine takes aim at US Gulf

The US National Hurricane Center on Aug. 26 upgraded a tropical disturbance to Tropical Depression Nine. The system, currently located in the central Caribbean, is expected to enter the Gulf of Mexico late Aug. 27 as a tropical storm and then strengthen to hurricane status before approaching the central US Gulf Coast. The NHC's current forecast cone shows the storm likely making landfall in Louisiana, potentially threatening both offshore oil production and coast energy infrastructure.

Chevron was moving nonessential crews from its operated US Gulf of Mexico facilities, the company said Aug. 26, noting that production at those platforms remained at normal levels.

Although Chevron did not specifically name the platforms from which it is evacuating crews, the company has several major fields that could be in or near the storm's projected path. These include Tahiti, Blind Faith, Jack/St. Malo and Big Foot. It is also developing the Anchor project also potentially in the storm's path.

NHC was also tracking two additional disturbances in the Atlantic Basin, each with a 40%-60% chance of cyclone formation within 48 hours.