Brent slips below $80 as demand concerns outweigh Middle East risks (NYSEARCA:USO)

WTI and Brent crude settled at their lowest levels since early June on Monday, giving up overnight gains as the prospect of a wider Israel-Hezbollah conflict appeared to ease and demand concerns regained market focus .

Reuters reported two Israeli officials said the country would retaliate against the Iran-backed terror group blamed for Saturday’s attack that killed 12 children and teenagers, but in a way that would not spark a wider conflict.

“It seems that the market has come to the conclusion that – as horrendous as these episodes are – they are not likely to cause conflict at the regional level,” John Kilduff, again at Capital, told Reuters.

But “the ability to maintain the conflict cannot withstand many more repetitions of what was seen on Saturday,” said RBC Capital’s Helima Croft, as any Iranian involvement would “raise the specter of retaliation similar to 2019,” when there were direct attacks. on tanks in the Strait of Hormuz and key pipelines and facilities in the area.

China’s economic woes are also “sucking the juice out of the oil market” after data released earlier this month showed the country’s total fuel oil imports fell 11% in the first half of this year, raising concerns about the broader outlook for demand in the world’s largest crude oil importer. .

Traders are looking ahead to this week’s OPEC+ meeting of the Joint Ministerial Monitoring Committee, which is not expected to change the group’s policy of starting to withdraw some voluntary production cuts after September, but the meeting will be closely watched for any signs of a relenting or delay. turning the barrels.

The disputed outcome of Venezuela’s presidential election did not appear to have much of an impact on the oil market.

First-month Nymex crude (CL1:COM) for September delivery has been settled -1.7% at $75.81/bbl and September Brent crude (CO1:COM) was finished -1.6% at $79.78/bbl, the lowest close for both benchmarks since June 7.

First month Nymex natural gas (NG1:COM) for August delivery has ended -4.9% at $1.907/MMBtu, the fifth consecutive daily loss and the lowest settlement value since April 26.

The U.S. natural gas market remains technically weak, and risks from higher production and hurricanes could be contained, according to Eli Rubin of EBW Analytics.

ETFs: (NYSEARCA: USO), (BNO), (UCO), (SCO), (USL), (DBO), (PICARE), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

The cost of drilling and fracturing new wells in US shale basins is expected to fall by ~10% this year, Wood Mackenzie said in a new report.

“Both E&P and service providers are focusing on significant efficiency improvements, albeit for different reasons,” wrote Wood Mackenzie’s Nathan Nemeth. “If E&P is looking to reduce costs further, it must come from further efficiency improvements as (oil services) prices are unlikely to come down.”