Oil advanced, solidifying gains from the previous week, as a move above key technical levels helped extend a rally sparked by signs that the Federal Reserve will resume cutting interest rates.
West Texas Intermediate climbed 1.8% to approach $65 a barrel and reach the highest settlement price in three weeks, while Brent closed near $69 a barrel. Fed Chair Jerome Powell on Friday signaled in a speech that the central bank could cut interest rates as soon as its September policy meeting. The comments boosted crude futures on expectations that a rate cut would boost the US economy and raise oil demand.
WTI’s jump above its 100-day moving average of about $64.45 also spurred some buying from algorithmic-based traders.
Elsewhere, Ukraine struck Russia’s Baltic port of Ust-Luga overnight, the latest in a series of attacks on energy infrastructure. Ukraine has attacked eight Russian refineries so far this month, raising concerns of exacerbated fuel market tightness.
Longer-term sentiment remains subdued. Money managers cut their bullish position on crude to the lowest in about 17 years as two of the world’s main oil forecasting agencies said inventories are poised for a glut next year. Crude has been trading in a narrow range since early August as traders reconcile a bearish long-term outlook with several potentially bullish near-term geopolitical factors.
On the one hand, the US has threatened to double a tariff on all imports from India to 50% in retaliation for its purchases of Russian oil. Though the penalty is set to take effect on Wednesday, Indian diplomats have said local processors will continue taking crude from Moscow.
On the other hand, OPEC+’s decision to resume a large portion of idled production has raised concerns about a potential oversupply, with futures now down about 10% lower this year.
Brent futures are now trading at a rare discount to their regional counterpart in Dubai — a shift that could heighten concerns about a growing surplus. The move, months in the making, underscores signs that supply-demand balances in the Atlantic Basin — where contracts are largely priced — are weakening relative to the Middle East, despite OPEC+ adding millions of barrels in daily output.
Trading volumes in Brent futures were lower than the daily average on Monday, with some traders off for a UK public holiday.
Oil Prices
WTI for October delivery gained 1.8% to settle at $64.80 a barrel in New York.
Brent for October settlement rose 1.6% to settle at $68.80 a barrel.
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