Oil rallied from three-week lows as tightening supplies took center stage, at least temporarily sidelining concerns about the Chinese economy and US monetary policy that had fueled a three-day slide .
West Texas Intermediate settled above $80 a barrel after falling 4.6% this week through Wednesday. Physical markets around the world have shown signs of robust demand, U.S. commercial oil inventories are the lowest since January and importers in Asia have been on a crude buying spree. The pullback in the WTI forward curve widened, indicating tightness for near-term deliveries.
Overhanging the rally, however, are worries about the post-pandemic recovery of top oil importer China, with authorities saying state banks are stepping up currency intervention. Liquidity remains thin and volatility indicators are muted, reflecting low trading interest, market participants said.
“In the short term, we do not expect significant flows from trend followers, suggesting that price action may remain broadly ranged for now,” said Daniel Ghali, senior commodities strategist at TD Securities.
In the United States, Federal Reserve officials remained concerned at their July policy meeting that inflation would not recede and that further interest rate hikes may be necessary, according to minutes of the meeting. Higher borrowing costs may hurt energy demand, while supporting gains in the US dollar.
With prices falling from multi-month highs in recent days, Citigroup Inc. urged investors to sell oil in the winter, given the likelihood of soft demand and ample supply.
“The oil market has been unable to escape broader market concerns following a weaker-than-expected set of Chinese macro data this week,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, we remain constructive on oil given the expectation that fundamentals will continue to tighten due to ongoing OPEC+ supply cuts.”
Prices:
- WTI for September delivery rose $1.01 to settle at $80.39 a barrel in New York.
- It closed Wednesday at $79.38 a barrel, the lowest settlement since July 26.
- Brent for October settlement advanced 67 cents to $84.12 a barrel.
– With the assistance of Yongchang Chin i Chunzi Xu.
