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Charles Kennedy

Charles Kennedy

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Oil Gains Nearly 2% After ‘Overblown’ Selloff

Oil tanker at port

Brent crude oil was up nearly 2% on Monday, largely driven by the easing of economic slowdown fears in the U.S.

At 10:39 a.m. EST on Monday, Brent was trading up 1.62% at $76.52, for a $1.22 gain on the day, while West Texas Intermediate (WTI) was trading up 1.95% at $72.73, for a $1.39 gain on the day.

Last week, while Brent was up on Friday, the crude benchmark shed over 5% and WTI shed over 7% on the week, hitting their lowest levels since Q4 2021. Friday also marked three straight weeks of price slides. 

Driving bearish sentiment in markets are renewed fears of a US banking crisis contagion and lukewarm industrial figures from China. Hijacked tankers in the Strait of Hormuz, falling US inventories, and the lack of a deal to unlock Kurdish oil exports all failed to offset the macroeconomic doom and gloom.

Recession, though, has been the buzzword putting oil prices in reverse, and Monday saw traders change course with the view that the sell-off had been overdone. Traders were also looking at the U.S. April jobs market data, though with a bit of caution as a strong labor market could prompt more rate hikes from the Federal Reserve.

Some analysts continue to be concerned about future oil demand, based on what is viewed as a deteriorating growth outlook, which has since been somewhat eased by the April jobs report. 

However, over the weekend, Goldman Sachs labeled the oil sell-off as “overblown” in the face of a strong demand outlook, also noting that production cuts from OPEC+ begin this month, putting further pressure on supply to meet demand. 

The market will now be looking first to OPEC’s monthly oil market report due out on May 11, followed by the next OPEC+ meeting scheduled for June 4. 

By Charles Kennedy for Oilprice.com

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