Oil Rises as Signs of Tight Market Counter Technical Indicators
Oil pushed higher as a cold front in the US and signs of a tighter market countered technical signals that crude’s rally may be overdone.
West Texas Intermediate advanced almost 1% to trade above $74 a barrel, buoyed by rising equities and frigid weather in the US that’s boosting demand for heating fuel and increasing the risk of freeze-offs in production areas. And while crude fell for the first time in six sessions on Monday after failing to breach the $75 psychological level, some internal market gauges have strengthened in recent days.
Adding to signs of a tighter supply-demand balance, Middle Eastern oil markets have been firmer in recent weeks as refiners in China sought alternatives to Iranian and Russian crude. At the same time Russian data show that its oil production was below its OPEC+ output target last month, another sign of limited supplies.
Meanwhile in China, ports in the eastern province of Shandong, the top destination for Iranian crude, were urged to prevent US-sanctioned tankers from docking at their berths.
Crude markets have witnessed a robust start to the year as a result of technical buying after prices broke out of a monthslong range. Still, the relative strength index shows prices are trading at overbought levels, a reading that indicates crude was due for a pullback, and many analysts continue to warn of an oversupply later in the year.
“Whilst renewed strength cannot be ruled out in the immediate future should freezing temperatures persist, the sudden change in sentiment yesterday afternoon insinuates that a protracted rally will be difficult to sustain without fundamental changes in economic prospects or the global oil balance,” said Tamas Varga, an analyst at brokerage PVM.
WTI for February delivery climbed 0.9% to $74.22 a barrel at 10:52 a.m. in New York. Brent for March delivery rose 0.9% to $77.02 a barrel.
Source : Bloomberg
