Oil halted its rally in thin summer trading, weighed down by a risk-off tone in markets and technical barriers to further advances.
Futures in New York eased to settle near $81 a barrel with a stronger dollar weighing on the commodity. While crude’s summer rally has erased its year-to-date losses, traders have been bracing for a technical correction. Oil has traded in overbought territory on its relative strength index on several occasions in recent sessions, signaling a potential pullback. Volumes also remain muted in light summer trading, while volatility is at the lowest since January 2020.
Crude surged last month amid signals that demand is running ahead of supply after OPEC+ reduced output, and oil giants BP Plc and Chevron Corp. have said consumption is set to increase. Banks including Goldman Sachs Group Inc. are in agreement, seeing the market swinging into a deficit after a supply glut earlier this year.
Prices also have been aided by broader risk-on sentiment as equity markets trade at yearly highs. The global outlook for demand improved amid signs of additional stimulus for the Chinese economy and speculation that the Federal Reserve is close to ending its cycle of monetary tightening.
Still, there are reasons to be cautious about a further rally in the short-term. The biggest oil exchange-traded fund posted a record daily outflow recently as investors take profit from crude’s advance.
Prices:
- WTI for September delivery fell 43 cents to settle at $81.37 in New York.
- Brent for October settlement shed 52 cents to settle at $84.91 a barrel.
