Oil rose on a technical correction to the upside after last week’s decline, helped by supply disruptions in Canada and positive fuel demand indications.
West Texas Intermediate rose as much as 3% on Monday to close above $73 a barrel amid several supportive factors. Several Alberta oil producers have shut down nearly 150,000 barrels a day due to wildfires, while better-than-expected U.S. jobs data on Friday eased concerns of an economic slowdown.
“The jobs numbers are certainly helping,” said Paul Horsnell, head of commodities research at Standard Chartered Bank. “But every now and then, the answer to why the price has gone up is simple: it was too low.”
Oil has fallen about 10% this year as the Federal Reserve’s most aggressive tightening campaign in a generation stokes recessionary fears. Market participants have turned more bearish, and money managers have increased bets that Brent prices will fall the most since last March.
But a wave of speculative short-selling could not be justified by either macroeconomic data or oil fundamentals, so the market had to correct, Horsnell added. Physical demand signals also suggest that price weakness was overblown. Data from Vortexa showed that the amount of crude oil held worldwide in stationary tankers fell to the lowest level since mid-February.
The rebound in diesel and gasoline also helped drive oil prices higher, said Rebecca Babin, senior energy trader at CIBC Private Wealth. Both fuels outperformed crude oil, while refining margins have started to recover from recent lows.
Prices:
- WTI for June delivery rose $1.82 to settle at $73.16 a barrel in New York.
- Brent for July settlement rose $1.71 to settle at $77.01 a barrel.
