Oil Rises from Four-Year Low on Signs of Excessive Decline
Oil rose from its lowest close in four years after a technical gauge suggested the recent crude decline may have been overdone.
Brent rose to trade near $61 a barrel after falling nearly 10% over the past six sessions, and West Texas Intermediate rose to around $58. Both benchmarks recently fell into oversold territory on the nine-day relative strength index and breached the lower Bollinger Bands, both pointing to a market that has fallen too fast. China’s markets are also reopening after a holiday.
There are also signs that lower oil prices are starting to impact supplies outside the Organization of the Petroleum Exporting Countries. Diamondback Energy Inc., the largest independent producer in the Permian Basin, cut its own full-year production forecast on Monday and said it expects onshore oil rigs across the U.S. industry to fall nearly 10% by the end of the second quarter. Oil fell on Monday after OPEC+ agreed over the weekend to increase supply further from June, with Saudi Arabia warning of additional increases if overproducing members don’t follow suit.
That exacerbated the bearish drag on futures, which are near a four-year low as trade tensions between the world’s two largest economies threaten global growth.
The focus is “now shifting from the already priced-in OPEC+ production increases to demand, which again depends on the global trade war and especially the ability to find a solution,” said Ole Hansen, head of commodity strategy at Saxo Bank. “U.S. shale producers signaling more difficult months ahead in terms of maintaining production are also supporting prices.”
U.S. President Donald Trump has said he is willing to lower tariffs on China at some point because the levies are so high that the two countries are essentially stopping doing business with each other. He added that he has no plans to talk to his Chinese counterpart this week. Brent for July delivery rose 2.5% to $61.75 a barrel at 9:57 a.m. in London. WTI for June delivery rose 2.5% to $58.58 a barrel.
Source: Bloomberg
