Oil Trades Higher Amidst Tight Supply
Crude oil prices rose on Friday but posted their first weekly loss since early April as fears of a global economic slowdown affected market sentiment, Australia’s ANZ Bank said in a Monday note.
The rally in Friday’s session capped the weekly loss, while a fall in consumer inflation expectations raised the prospect of less aggressive rate hikes by the US Federal Reserve, the bank noted.
Oil rises amid a continued tight supply environment, resulting in the widening of the backwardation in oil futures markets, despite last week’s price falls, OANDA analyst Jeffrey Halley said in a Monday note.
Ecuadorian oil production is expected to go completely offline this week due to cost-of-living protests, but this is having no impact on markets today, Halley noted. The Organization of the Petroleum Exporting Countries should also be a non-event after the group increased production slightly last month.
Meanwhile, increasing risks around Russia and European natural gas exports remain, contributing to tightness in energy supplies, with downstream impacts of high oil and gas prices on fertilizer manufacturing, Halley said. READ: Oil Dips as U.S Seeks to Tackle Tight Energy Condition
Brent crude rose 2.6% to $112.40 on Friday while West Texas Intermediate crude gained 3.5% to $107.50. It is unlikely that Brent will drop below $100 amid current market conditions despite the noise from other asset classes, according to Halley.
However, WTI’s technical picture still looks more vulnerable, with a possible cap on Russian oil prices likely to be more supportive of Brent. #Oil Trades Higher Amidst Tight Supply
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