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Oil steadied as investors assessed a complex outlook for global crude demand after a period of volatile trading.
West Texas Intermediate held above US$71 a barrel after surging by more than 4 percent on Friday, when futures pared a steep weekly loss. While fears of a US recession and bank failures have rattled markets recently, pushing crude to the lowest intraday level since late 2021, physical demand signals suggest at least some of the recent weakness in prices may have been overdone.
Traders will get a brace of outlooks this week on how the second half of the year may shape up. The Organisation of Petroleum Exporting Countries issues its monthly snapshot on Thursday and, ahead of that, the US Energy Information Administration delivers its short-term outlook on Tuesday.
The world’s largest oil producer, Saudi Aramco, will also disclose earnings.
Crude has dropped by about 11 percent this year as the Federal Reserve’s most aggressive tightening campaign in a generation spurred concerns of a US slowdown or recession, although most investors now expect that policymakers will pause rate increases.
The drop has come despite a surprise production cut by OPEC and its allies including Russia. Still, there’s little evidence that Moscow has so far reduced its supply despite a vow to do so. Oil’s recent weakness may reflect “an outsized amplification of the real economic dampening, especially given the financial linkages,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. There are now risks of a further “OPEC supply response, or at least jawboning from the group, in an attempt to backstop or shore up prices,” he said. Speculators sharply ramped up bets against oil markets last week, data showed. Money managers posted the largest increase on record in short positions on Europe’s diesel market, while also lifting them by the most since last March on Brent. US crude and diesel markets also saw increases just weeks after the OPEC+ cut designed to stem bearishness. -Bloomberg
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