Oil rose to the highest since April as signs of economic strength in the US improved the outlook for demand, outweighing concerns about a price correction based on technical factors.
(Bloomberg) — Oil rose to the highest since April as signs of economic strength in the US improved the outlook for demand, outweighing concerns about a price correction based on technical factors.
West Texas Intermediate settled above $80 a barrel as US economic growth exceeded expectations and speculation mounted that the Federal Reserve is nearing the end of its monetary tightening cycle. But crude is trading in overbought territory on its relative strength index for a third day, raising the threat of a pullback.
“Crude extending the bullish rally, led by ‘risk back on’ sentiment in the equity markets, is keeping the buyers present in the crude space,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. Yet “the market has gone up too far, too fast with speculative buying, and that is creating the overbought condition, so we should see some erratic corrections soon.”
Oil has broadly rallied since late June, aided by supply cuts from the Organization of Petroleum Exporting Countries and its allies, and signs that Russian seaborne crude exports are falling. But higher fuel prices are adding renewed inflationary pressure in the global economy, with gasoline surging around the world.
Saudi Arabia is expected to extend its 1 million barrel-a-day oil supply cut into September as it seeks to foster a tentative recovery in prices. With Russia also curbing output, banks including Standard Chartered Plc anticipate a deepening shortfall in the coming months.
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