Oil’s biggest rally this year stalled as draws in US stocks failed to quell worries about demand in an uncertain economy.
West Texas Intermediate stayed near $80 a barrel, trading in overbought territory for a third day in the nine-day relative strength index. Brent rose late in the session after Saudi Arabia raised the official selling price of oil to Asian customers for the third consecutive month, seen as a vote of confidence in demand.
U.S. crude stockpiles fell 3.7 million barrels last week, less than traders had expected, while other economic data showed softer business activity last month.
“The rally in crude is likely to be contained in the face of soft economic readings,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. However, Brent is likely to outperform in the near term as Asian demand remains robust and OPEC cuts affect the global benchmark more directly, he added.
Crude oil rallied in the first two days of the week after the Organization of the Petroleum Exporting Countries and its allies blindsided the market with a surprise supply cut. The cartel’s move, apparently aimed at investors betting against earnings, reignited the debate among major banks over whether crude oil can return to $100 a barrel.
Oil has risen more than 20% since March lows, when a banking crisis hurt appetite for risk assets. Prior to the lifting of the OPEC+ cut, the market was driven by expectations of a pick-up in Chinese demand following the end of its Zero Covid policy. A weaker dollar has helped increase the appeal of commodities priced in the US currency.
Prices:
- WTI for May delivery fell 10 cents to settle at $80.61 a barrel in New York.
- Brent for June settlement rose 5 cents to settle at $84.99 a barrel.
