Oil advanced for a second day, with investors watching for any signs of fresh banking-industry turmoil ahead of the Federal Reserve’s rate meeting this week.
(Bloomberg) — Oil advanced for a second day, with investors watching for any signs of fresh banking-industry turmoil ahead of the Federal Reserve’s rate meeting this week.
West Texas Intermediate rose above $68 a barrel after swinging in a $3-plus range on Monday. Traders are starting to return to risk markets after authorities stepped in to shore up the financial system. US officials are also studying ways they might temporarily expand protection for all deposits.
The banking crisis will eventually be bullish for oil because it will hit supply harder than demand, according to Jeff Currie, Goldman Sachs Group Inc.’s global head of commodities. The world’s oil-trading elite predicted crude prices wouldn’t stay down too long, as rising demand and tight supply overwhelm the initial fallout from the tumult in financial markets.
Financial-sector tremors have boosted expectations that major central banks including the Federal Reserve will slow the pace of monetary tightening, even as inflation remains elevated. Fed policymakers decide their next step on Wednesday, with investors increasing bets on a quarter-point hike.
“Short sellers have been in control since the breakdown last week,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank. “For that to change, we need to see prices climb back above 75 and 70 in Brent and WTI respectively.”
Crude prices have fluctuated this year amid concerns that the Fed will keep ratcheting up interest rates, and anticipation about China’s demand as the country recovers from years of pandemic-related lockdowns. Banking turmoil, recession fears, and resilience in Russian flows helped to drive prices lower earlier this month.
Workers won’t be striking at BP’s North Sea platforms after a pay deal was reached, the Unite union said in an emailed statement. Strike action continued in France, where Total halted the nation’s biggest refinery, leaving refiners unable to deliver fuels. France released stockpiles of oil products this month to avert a shortage.
Brent and WTI moved out of oversold territory on a 14-day Relative Strength Index basis and both benchmarks closed above their lower Bollinger bands.
Energy Daily, Bloomberg’s daily energy and commodities newsletter, is now available. Sign up here.
–With assistance from Grant Smith.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.