Oil Rally Wavers As Recession Fears Curb OPEC+ Momentum
Track the latest oil prices here.
(Bloomberg) -- Oil markets were choppy as concerns of slowing demand again came to the fore, adding resistance to a rally spurred by OPEC+’s output cut.
West Texas Intermediate hovered near $93 a barrel, tentatively adding to a five-day run of gains that brought futures up 17%. A tighter supply outlook following last week’s OPEC+ meeting gave crude its biggest weekly gain since March, but fears the US Federal Reserve will go on boosting rates to quell inflation caused declining equity markets and a stronger dollar, making commodities that are priced in the currency less appealing.
“Crude continues to process last week’s OPEC meeting, specifically how the US may respond to OPEC+’s decision to cut demand into a tight market,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management. “Demand concerns are at play in the background as China data was weak overnight but with limited liquidity, short covering may continue to drive trading in the near term.”
Oil markets continue to be buffeted by concerns about the global economy and the cuts announced by the Organization of Petroleum Exporting Countries and its allies. Traders are closely watching for demand signals as growth is likely to suffer from central banks’ monetary policy. OPEC+’s output cuts, which drew rebuke from the US, could turn out to be much smaller in reality, but a slew of leading banks said it could still send prices higher this year.
A US jobs report last week rekindled concerns about further interest rate hikes. The US Fed has signaled a potential fourth 75 basis point hike in November.
Also read: Oil Production Cut Could Be 10% Real, 90% Illusion: Julian Lee
Key oil-market gauges have shown signs of increased bullishness since the OPEC+ decision last week. The spread between the nearest two December contracts for Brent -- a much-watched marker of the market’s health -- rallied to the strongest level since June.
At the same time, options markets have seen a flurry of bullish call trades. On Friday, Brent options volumes were the highest since March as traders placed a series of wagers on rising prices.
Elements, Bloomberg’s daily energy and commodities newsletter, is now available. Sign up here.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.