SAN FRANCISCO (MarketWatch) — Oil futures settled lower Monday, below $89 a barrel, with investors eyeing the expected restart of a key North American pipeline as well as developments in the Middle East and moves in the U.S. dollar.
Other energy futures also finished lower, with natural gas leading the percentage declines.
“With the Keystone pipeline due to restart today, we were not surprised to see the selloff in crude continue,” said Tariq Zahir, a managing member at Tyche Capital Advisors LLC. “With those fears easing, traders are looking back to the fundamentals of the energy markets where at least we are very well supplied and way above our five-year averages of inventories.”
Crude for November delivery /zigman2/quotes/209727081/delayed CLX22 0.00% fell $1.32, or 1.5%, to settle at $88.73 a barrel on the New York Mercantile Exchange, after trading in a range between $90.80 and $88.20.
The November contract expired at the close. December crude /zigman2/quotes/209727389/delayed CLZ22 -0.07% , which became the front-month contract when the regular Nymex session ended Monday, settled at $88.65 a barrel, down 1.8%.
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“With the slight tick upward in the U.S. dollar and the weakness in economies worldwide, the demand for energy is weak and supplies plentiful,” said Zahir. “We feel we could continue to see downward pressure in the upcoming days as the energy markets are starting to focus on the fundamentals.”
Supply concerns arose following the temporary closure of a key pipeline in North America last week. The Keystone pipeline, which sends about 500,000 barrels per day from Canada to the Midwest, was shut last Thursday but was reportedly due to restart Monday, a day later than expected.
A spokesman for TransCanada Corp. /zigman2/quotes/203758221/delayed CA:TRP +0.57% /zigman2/quotes/200192679/composite TRP +1.00% told MarketWatch in an email Monday that he would provide an update once the company has a better sense on the restart.
Tensions in the Middle East were also in focus. Brig. Gen. Wissam al-Hassan, Lebanon’s intelligence chief, was assassinated in a Friday car bombing in Beirut. Media reports said he was allied with the anti-Syria opposition, raising fears of a political crisis in Lebanon.
“The uncertain situation in the Middle East [...] remains a factor with the tendency to drive prices upward. Lebanon has now become a new seat of unrest, with violent disputes having taken place there yesterday,” analysts at Commerzbank wrote in a note.
“The biggest risk factor for the oil price is further deterioration of general market sentiment and accompanied growth in risk aversion,” they added.
Iran, meanwhile, is likely to wait until the U.S. presidential election in November before deciding what course to take on its nuclear program, Dennis Ross, former Middle East adviser to President Barack Obama, said Sunday on Platts Energy Week, an all-energy news and talk show.
Late in the trading session, a slight turn higher in the dollar added to pressure on dollar-denominated oil prices. The dollar index /zigman2/quotes/210598269/delayed DXY -0.19% , which measures the greenback against a basket of six rival currencies, was at 79.651, up from an earlier low of 79.470 and up from 79.629 late Friday.
Heating oil for December delivery /zigman2/quotes/210066117/delayed HOZ22 0.00% shed nearly 6 cents, or 1.8%, to $3.08 a gallon, while November gasoline /zigman2/quotes/210289295/delayed RBX22 0.00% fell 5 cents, or 1.8%, to $2.65 a gallon. Natural gas for November delivery declined by 16.5 cents, or 4.6%, to $3.45 per million British thermal units. It ended last week up 0.2%.
Natural gas recently revisited the technical resistance level of $3.65, and it “looks like profits were taken up at those levels,” said Tyche Capital’s Zahir. “Of course, supplies are not a concern in the natural-gas market.”