Oil Rises as Market Metrics Signal Recent Decline Overdone
Oil rose as the U.S. signaled it would clamp down on Iranian crude exports and internal market metrics showed signs that recent declines were overdone.
West Texas Intermediate rose nearly 1% to near $67 a barrel, recovering from a six-month low. U.S. Energy Secretary Chris Wright said Monday that the Trump administration is preparing to impose U.S. sanctions on Iranian oil production, potentially tightening the market. The dollar also fell, making commodities priced in the currency more attractive.
Crude’s gains came even as fresh trade attacks from U.S. President Donald Trump have deepened a rout in risk assets. Despite a weakening economic outlook weighing on futures prices in recent weeks, WTI’s prompt spread — a leading indicator of short-term supply and demand balances — has held steady in a bullish, backwardated structure. That’s a sign that crude’s growth fears are less severe than other assets, said Jon Byrne, an analyst at Strategas Securities.
“Crude could be on the verge of decoupling from other risk assets during this selloff,” Byrne said.
Oil has fallen nearly a fifth from its mid-January peak as Trump’s chaotic tariffs and push to cut federal spending have clouded the economic outlook for the world’s biggest crude producer and consumer. Other weakening factors include OPEC+’s plan to boost supply and weakening demand in China.
At a major industry conference in Houston, executives from some of the world’s leading oil and gas producers have also voiced their support for Trump’s plan for higher U.S. production and energy dominance. Executives from some of the world’s leading oil and gas producers — including Chevron Corp., Shell Plc and Saudi Aramco — gave their full backing to President Trump’s energy dominance agenda at the meeting.
At the same time, Western security officials say Russian President Vladimir Putin has no intention of compromising on demands for land, peacekeeping troops and Ukraine’s neutrality in any peace talks, complicating the path for Russian crude to return to service.
“Given how light the position is, it doesn’t take much to move the market,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “In my view, these are all noisy headlines that could trigger a short-term rally, but the real economic data remains concerning, which will ultimately keep crude pressured.”
Source: Bloomberg
