Oil rose 1.6% after three weeks of declines set the stage for a relief rally.
West Texas Intermediate traded above $78 a barrel Monday, snapping a rout that saw oil plummet more than $13. While a weakening demand outlook and rising US supplies continue to weigh on the market, technical signals suggest the recent sell-off was overdone. Also supporting prices, OPEC on Monday reiterated its view that global supply balances are tight and consumption healthy.
“The futures market appears oversold,” RBC Capital Markets analysts including Michael Tran wrote in a note. Yet he cautioned that the rally may be short-lived with investors persistently on edge about demand given stubbornly high US interest rates.
Despite OPEC’s bullish consumption forecast, Saudi Arabia is keeping its output at the lowest level in years and the cartel, in concert with Russia, has committed to restraining exports through the end of the year.
That’s sending mixed signals to traders who are now awaiting monthly data from the International Energy Agency on Tuesday and two weeks’ worth of US inventory data on Wednesday.
Crude inventories, meanwhile, appear ample. Supplies from Middle East — the source of about a third of the world’s crude — remain unaffected by the conflict between Israel and Hamas, while shipments from Russia and the US are increasing. In a move that could add further barrels to the market, Iraqi Oil Minister Hayyan Abdul Ghani is visiting the Kurdistan region to discuss the resumption of exports via Ceyhan in Turkey. The major pipeline has been halted since March.
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