Oil swung to gains from losses as investors weighed a weaker dollar and the outlook for a tighter market in the second half against mixed US data on crude and petroleum stockpiles.
(Bloomberg) — Oil swung to gains from losses as investors weighed a weaker dollar and the outlook for a tighter market in the second half against mixed US data on crude and petroleum stockpiles.
West Texas Intermediate futures traded near $73 a barrel after gaining 1.1% Wednesday. Crude inventories at the Cushing storage hub rose for a seventh week, while gasoline stockpiles also gained, according to government figures. However, refinery utilization was at the highest level since 2019, providing bullish sentiment for summer demand.
Oil is still down 10% this year as China’s sluggish economic recovery, interest rate hikes from the Federal Reserve and robust Russian crude flows weigh on prices. The dollar weakened against other currencies on Thursday, making oil relatively less expensive for buyers of the commodity in other markets.
Saudi Arabia’s pledge over the weekend to cut more supply from the market in July led to an initial surge in prices on Monday, but optimism around the curbs has quickly faded. Citigroup Inc. said the cut wouldn’t offset weak market fundamentals, with the bank increasingly bearish on the outlook for the second half. Goldman Sachs Group Inc. meanwhile called the move “moderately bullish.”
“Oil markets are in the hands of financial market sentiment at the moment and move in sync with equity markets and the dollar,” said Giovanni Staunovo, a commodities analyst at UBS Group AG.
“The outlook is of a tighter market, but investors want to see it first before they believe it.” Lower Saudi production and higher official prices probably will keep big buyers like China drawing US crude, lowering inventories and boosting exports, he said.
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While US gasoline stockpiles rose for the first time in five weeks, inventories are still below the five-year seasonal average, according to Energy Information Administration data. The Memorial Day weekend at the end of May is typically the start of the nation’s summer driving season.
Applications for US unemployment benefits jumped last week to the highest level since October 2021, suggesting mounting layoff announcements may be starting to translate into job cuts. That indication of the jobs market cooling delivered a boost in the tech sector, which has been flagging under speculation that the Federal Reserve will keep interest rates higher for longer.
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