Oil swung to gains after losing ground for much of the session as concerns that sluggish economic growth will eat into demand were weighed against a delay in the resumption of Iraqi flows through Turkey and US plans to refill the country’s Strategic Petroleum Reserve.
(Bloomberg) — Oil swung to gains after losing ground for much of the session as concerns that sluggish economic growth will eat into demand were weighed against a delay in the resumption of Iraqi flows through Turkey and US plans to refill the country’s Strategic Petroleum Reserve.
West Texas Intermediate rose toward $72 a barrel, after dropping by almost 4% over the previous two sessions. The physical market is showing signs of weakness amid poor refining margins and lackluster buying in some areas. The two biggest economies showed further evidence of cooling this week, with US jobless claims rising and China’s recovery waning.
Turkey probably won’t accept a request from Baghdad for oil exports through the port of Ceyhan to resume on Saturday, according to a Turkish official familiar with the matter. Iraq’s oil minister had said late Thursday that he was optimistic about a resumption over the weekend.
“Overall market sentiment remains weak,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank AS. “We may have seen a low already, but with sentiment, more than actual supply and demand in control of the price it is difficult to say.”
Crude has retreated by about 14% over the past month as the US economy moved closer to recession and China’s rebound disappointed some market watchers, putting a question mark over energy demand. So far, that’s outweighed the lift from supply cuts announced by the Organization of Petroleum Exporting Countries and its allies.
On Thursday, Energy Secretary Jennifer Granholm told lawmakers the US hopes to start refilling the nation’s strategic reserves after a congressionally-mandated drawdown ends next month. Earlier this week, the administration said it planned to begin purchasing oil for the SPR after finishing maintenance.
Such a move could potentially exacerbate supply shortages many analysts see materializing later this year. OPEC this week reiterated it sees demand outpacing the addition of new barrels to the market by the end of this year.
“A significant supply deficit is looming on the market in the second half of the year,” Commerbank AG analysts including Carsten Fritsch said in a note today. That leads the bank to expect “rising oil prices during the course of the year.”
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