Oil settled a penny higher after a choppy session in which mixed signals, including a rally in Saudi crude prices and broader risk-off sentiment, pushed traders in opposite directions.
Saudi Arabia on Thursday raised the official selling prices of its flagship Arab Light in all regions, a sign that it is confident in market demand. The decision has caused spreads to tighten quickly on expectations that buyers will redirect to the Atlantic basin and tighten the Brent and US crude markets.
“I think Saudi Arabia realizes that there is a mismatch between different crude grades due to production cuts and is trying to recalibrate regional grades by raising their OSP and forcing buyers to other regions,” he said Rebecca Babin, senior energy trader at CIBC Private Equity. “This is really threading the needle and shows how difficult it is to balance the markets in today’s environment.”
However, broader risk-off sentiment weighed on prices after strong U.S. jobs data bolstered expectations that the Federal Reserve would continue its policy of rate hikes to cool the economy . West Texas Intermediate traded in a $2 range, largely tracking broader equity markets.
Crude remains around 10% lower this year, with China’s lackluster economic recovery and higher interest rates in the US and Europe weighing on the demand outlook. Rising borrowing costs are causing a reduction in global oil inventories, possibly setting prices for peaks further down.
US inventories fell 1.5 million barrels last week, according to government data. While the drop was less than expected, strength in gasoline demand after the U.S. holiday and the appeal of refined products helped push prices higher.
Prices:
- WTI for August delivery rose 1 cent to settle at $71.80 a barrel in New York.
- Brent for September settlement was down 13 cents at $76.52 a barrel.
