Oil’s red-hot rally cools after surge

Oil dropped alongside other financial assets and commodities as crude’s sizzling rally ran out of steam after hitting a seven-year high.

Futures in New York slumped more than three per cent, before paring losses to trade near $84 a barrel, following a decline in stocks and raw materials including copper. Crude has posted a gain of more than 10% so far this year, despite weakness in stock markets as monetary policy tightens. 

Though crude was pressured on Friday, much of Wall Street has been growing steadily more bullish on prices. Morgan Stanley joined Goldman Sachs Group Inc. in forecasting $100 oil later this year, although Citigroup Inc. cautioned that sticking to a bullish view could be dangerous after this quarter. The International Energy Agency this week said the oil market was looking tighter than previously thought, with demand proving resilient despite the rapid spread of the omicron variant. 

“Today the market is experiencing a small set back with the rest of commodity markets, but it is likely not more than consolidation after the recent rally,” said Jens Pedersen, senior analyst at Danske Bank A/S. 


  • West Texas Intermediate for March lost 1.7 per cent to $84.08 a barrel at 10:32 a.m. in London after falling as much as 3.2 per cent earlier.
  • Brent for March settlement slid 1.7 per cent to $86.84 a barrel

Crude’s bumper rally had pushed many of the main futures contracts into overbought territory on a technical basis. Brent, WTI and heating oil futures all moved out of that zone amid the sharp price pullback early Friday. 

Still, the focus remains on how much further the Organization of Petroleum Exporting Countries and its allies can lift output. Pavel Zavalny, head of the Russian Duma Energy Committee, said restoring output won’t be easy amid technical challenges and underinvestment. 

© 2022 Bloomberg L.P.

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