Oil Rebounds After Brutal Week as Traders Take Stock of Outlook
(Bloomberg) -- Oil rose from its lowest close since 2021 after a deep weekly loss pushed futures close to levels regarded as oversold, with the focus this week on three reports that may clarify the demand outlook.
Global benchmark Brent advanced above $72 a barrel after losing almost 10% last week, while West Texas Intermediate was near $69. Oil’s recent losses have been driven by signs of slowdowns in the US and China, endangering demand at a time of abundant supply. The slide left the 14-day relative strength index at 31, a signal losses may have been too rapid and too steep.
Traders will get plenty of market insights this week as three prominent forecasters — OPEC, the Energy Information Administration and the International Energy Agency — publish monthly outlooks. In addition, the Asia Pacific Petroleum Conference, a major industry gathering, takes place in Singapore.
Crude has tumbled over the past three weeks as the broader market mood became more bearish, joining other commodities and equities in a wide selloff that’s spooked investors. There has also been widespread softness in product markets, including US gasoline and European diesel. The weakness prompted OPEC+ to defer a plan to relax supply curbs by two months.
“OPEC+’s announcement to delay the start of its planned output increase signals that the producers’ group remains focused on balancing the market,” Morgan Stanley analysts including Martijn Rats said in a note, paring Brent forecasts to $75 a barrel for each of the next five quarters. “Unless demand weakens more, we estimate Brent likely remains anchored around the mid-$70s.”
The start-of-week gain came despite a decision by Saudi Arabia to cut pricing of its flagship grade for its main market in Asia next month, reflecting the poor demand outlook. State-owned Saudi Aramco lowered the official selling price of Arab Light for buyers in Asia by 70 cents to $1.30 a barrel against the regional benchmark, according to a price list seen by Bloomberg.
The market’s ructions are reflected in widely watched timespreads, which point to physical conditions becoming less tight. Brent’s prompt spread — the gap between its two nearest contracts — was 39 cents a barrel in backwardation. While that remains a positive pattern, marked by a premium for the nearer contract, the gap was more than $1 two weeks ago
To get Bloomberg’s Energy Daily newsletter into your inbox, click here.
