Oil’s biggest rally this year halted as US stockpile draws failed to quell concerns about demand in an uncertain economy.
(Bloomberg) — Oil’s biggest rally this year halted as US stockpile draws failed to quell concerns about demand in an uncertain economy.
West Texas Intermediate edged lower to trade near $80 a barrel, after trading in overbought territory for a third day on the nine-day relative strength index.
US crude stockpiles fell 3.7 million barrels last week, which was less than traders expected, while other economic data showed softer business activity last month. Oil’s price remained muted even as Saudi Arabia hiked its official selling price for oil to Asian customers for the third month in a row, which is considered a vote of confidence in demand.
“Inventory numbers were bullish but weaker economic data in the US this morning is overshadowing the demand improvements,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “The rally in crude is likely to be contained in the face of soft economic readings.”
Crude rallied in the first two days of the week after the Organization of Petroleum Exporting Countries and its allies blindsided the market with a surprise supply cut. The cartel’s move, apparently aimed at investors betting against gains, reinvigorated the debate among leading banks about whether crude can rally back to $100 a barrel.
Oil has risen by more than 20% since its lows in March, when a banking crisis harmed appetite for risk assets. Before the lift from the OPEC+ cut, the market was buoyed by expectations for a rebound in Chinese demand after the end of its Covid Zero policy. A weaker dollar has helped to boost the allure of commodities priced in the US currency.
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