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Oil held the bulk of a two-day surge as wildfires in Canada reduced supplies, offsetting concerns over lackluster global fuel demand.
West Texas Intermediate traded just below US$73 a barrel after rallying by nearly 7 percent over the prior two sessions amid speculation that earlier losses were overdone.
In Canada, at least 234 000 barrels a day of oil and gas production has been curtailed by the wildfires that have broken out across Alberta.
Still, despite some initial strength in US gasoline demand, there are now warning signs of flagging usage even as the country enters its peak-driving period — typically the seasonal high point for consumption. Demand for diesel, the other major product, has also been slipping across the globe.
Crude has retreated by about 9 percent this year, with futures whipsawed by the push and pull of the Federal Reserve’s monetary-tightening campaign, concerns that the US economy may soon slip into a recession, and countervailing hopes for a resurgence in Chinese demand after Beijing abandoned Covid Zero.
The decline in prices has come despite a surprise production cut by the Organisation of Petroleum Exporting Countries and its allies including Russia.
“Supply concerns were raised due to the wildfires in Alberta having prompted the evacuation of residents and shut down the oil-pipeline system,” said Charu Chanana, market strategist at Saxo Capital Markets Pte. The US Energy Information Administration releases its short-term market outlook later Tuesday, followed by the view from OPEC two days later.
In addition, traders will digest US consumer price inflation data this week for clues on whether the Federal Reserve has ended its tightening campaign.
“US CPI out on Wednesday may provide further signals on whether the market pricing of rate cuts this year can be realised,” said Chanana. – Bloomberg
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