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Oil rose on Monday as easing U.S. recession fears shifted market focus to tightening supplies, offering support after crude prices registered three straight weekly declines for the first time since November.
A healthy U.S. jobs report for April helped oil to climb by about 4 per cent on Friday even though labour market strength could compel the Federal Reserve to keep interest rates higher for longer.
Brent crude was up $1.09, or 1.5 per cent, at $76.39 a barrel by 0823 GMT. U.S. West Texas Intermediate (WTI) crude gained $1.03, or 1.4 per cent, to $72.37.
“Oil’s rebound follows energy stocks’ comeback on Wall Street last Friday after the U.S. reported strong job data, which eased concerns about an imminent economic recession,” said CMC Markets analyst Tina Teng.
Brent had finished last week with a decline of about 5.3 per cent while U.S. crude plunged by 7.1 per cent even after Friday’s rebound. Both benchmarks were down for three weeks in a row for the first time since November
Ole Hansen, head of commodity strategy at Saxo Bank, said oil’s recent drop looked excessive.
“An oversold market condition combined with Brent managing to find support ahead of the March low forced recently established short sellers to seek cover, potentially highlighting that the recent sell-off was overdone,” he said.
Goldman Sachs analysts on Saturday said that concerns over near-term demand and elevated supplies were “overblown”.
A round of voluntary output cuts by some members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, begin this month and the group holds its next meeting on June 4.
Before then, U.S. consumer price inflation figures for April will be in focus on Wednesday, potentially influencing the Fed’s stance on future interest rate decisions.
OPEC’s latest monthly oil market report is due on Thursday, providing an updated reading on the demand and supply outlook.
