Oil rose after its first drop in three sessions as the dollar weakened and financial markets strengthened.
West Texas Intermediate futures traded above $73 a barrel after closing 0.3 per cent lower on Wednesday. The dollar fell and European stocks and US equity futures climbed as broader markets bet that a peak in interest rates is near and that turmoil in the banking sector will continue to ease. A softer dollar makes commodities priced in the US currency more attractive.
Crude futures also have been supported this week by a dispute involving Iraqi, Turkish and Kurdish authorities that halted about 400,000 barrels a day of exports from the Ceyhan port.
On Wednesday, US government data showed crude inventories shrank the most this year last week, though demand for distillates continued to languish at the lowest seasonal level since 2016, a sign of a lackluster economy.
The equity market rally indicates that “the market’s current thinking is that the banking crisis is not systemic, which is supportive for oil,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. “The Kurdish situation – halting the crude exports – is also supportive on the supply side.”
Most market watchers are still betting on China’s recovery underpinning a price rally later this year, and comments from two of the nation’s oil majors painted an optimistic outlook. PetroChina and CNOOC Ltd. said a rebounding domestic economy can help cushion the impact of slower global growth.
Still, WTI remains on track for its fifth monthly decline in the wake of the banking crisis, concerns over potential recessions and resilient Russian output.
Prices
- WTI for May delivery rose 0.8 per cent to $73.57 a barrel at 10:20 a.m. in London.
- Brent for May settlement rose to $78.74 a barrel. The contract expires tomorrow.
- The more active June contract traded at $78.12 a barrel.
- Brent oil below $80/bbl looks at least $5-$7 oversold, according to JPMorgan.
© 2023 Bloomberg L.P.
