Geoffrey Smith 

Investing.com — Crude oil prices were higher early Monday in New York but came off the seven-year highs posted overnight on a rare sign of spot market slackness in the key Middle East region. 

According to Newswires, the official selling price of Iraq’s state-owned oil company for European and Asian buyers was reduced for December. This is contrary to a trend of tighter physical markets over recent weeks. China and India remain in struggle to manage their national energy systems. In China, flooding has caused widespread damage to the coal belt.

Futures hit an all-time high of $82.02 per barrel overnight. However, they were less than one dollar lower at $80.83 per barrel by 9:30 AM ET (1330 GMT). This is still just under 2% gain from Friday’s close. In the meantime, futures were 1.9% higher at $83.98/barrel 

Recent economic data in the U.S. has shown signs of rising inflation. This is encouraging people to hedge their bets on oil prices, which appear to be firmly supported right now. Friday’s CFTC data shows that net speculative long position in crude oil futures reached its highest level in seven weeks, although it is only half of the levels seen before Donald Trump began his trade war against China. 

It would be clear that the financial sector still has plenty to do with energy, as it can provide a short-term hedge against rising inflation. But, China’s wider energy crisis and India less so, are already causing demand destruction. China’s realty industry, which is an important energy consumer, is also experiencing a slowdown as worries about debt defaults increase. According to the Organization of the Petroleum Exporting Countries, the world market will rebound into surplus in early 2022. As global demand loses its momentum, the organization expects that the gradual increase in global output will catch up.

The U.S. is not responding quickly to higher spot prices. Many shale producers are unwilling or unable take on new debt in order to increase output. According to data from the U.S., the Permian basin in Texas has produced less than half a million barrels per day over the past year. However this has been offset partially by the fall in production in Alaska and the recent severe weather damage in the Gulf of Mexico.

Continue to deflate last week’s surge in LNG prices despite continued high LNG prices due to Asian and European demands. They fell 4.0% to $5.3290 per British thermal unit, down nearly 6.50 from last week. The price of gasoline RBOB futures fell to $2.3839 per gallon.