Oil Recovers as Stronger Equities Briefly Outweigh Looming Glut
Oil inched up along with broader markets after hitting a five-month low as optimism over interest rate cuts in the US briefly overshadowed expectations of excess supply.
West Texas Intermediate futures edged marginally higher toward $59 a barrel, following a roughly 10% slump over the past three weeks that saw the US benchmark reach its lowest price since May on Tuesday. Equities rebounded, with the Federal Reserve signaling another rate cut later this month. The dollar edged lower, making commodities priced in the currency more attractive.
The wider market strength on Wednesday snapped traders out of a hyperfocus on mounting signs that a long-anticipated surplus is finally setting in. Oil has been under pressure since the OPEC+ alliance decided in April to regain market share by returning shuttered production faster than expected, fueling fears of a looming glut. The International Energy Agency increased its estimate for record oversupply next year, and oil-trading giants say the long-anticipated excess is already starting to emerge.
Traders will likely hone in on an industry report on US oil supplies due later Wednesday. Government figures will be released on Thursday.
Investors are bracing for the ongoing tit-for-tat between Beijing and Washington, two biggest oil consumers, though there were some conciliatory tones. US Trade Representative Jamieson Greer predicted the tensions with China would ease.
Some market metrics are also flashing softness. A closely watched timespread — the gap between the two nearest December contracts for WTI — has flipped into contango, a bearish structure where nearer-term supply is cheaper than deliveries further out.
WTI for November rose 0.341% to trade at $58.90 as of 10:25 a.m. in New York. Brent for December settlement was 0.2% higher at $62.54 a barrel.
Source : Bloomberg.com
