Oil dipped, eroding its biggest weekly gain since early April, as investors juggled signs of tightening supply and persistent macro-economic concerns.
(Bloomberg) — Oil dipped, eroding its biggest weekly gain since early April, as investors juggled signs of tightening supply and persistent macro-economic concerns.
Brent futures traded near $78 a barrel having closed 4.8% higher last week following a pledge by Saudi Arabia and Russia to reduce supply. The market is flashing signs of strength and speculators have cut their bearish bets on the global benchmark and West Texas Intermediate crude.
However, Treasury Secretary Janet Yellen said the risk of a US recession is “not completely off the table,” adding an element of caution to the market. Data from China showed its economy is on the brink of deflation, while miner Rio Tinto Group said it sees a host of near-term economic challenges in the nation.
Oil has been rangebound since late-April, in part as China’s lackluster economic recovery and aggressive monetary tightening by central banks counter near-term tightness. A solid US employment report keeps the Federal Reserve on track to boost interest rates this month, maintaining headwinds for crude prices. The International Energy Agency and OPEC will provide snapshots of the market when they release monthly reports later this week.
“The formula has remained the same: recession fears are still competing for dominance with a tight oil balance,” said Tamas Varga, an analyst at brokerage PVM Oil Associates.
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The US announced on Friday that it’s purchasing 6 million more barrels of crude for the Strategic Petroleum Reserve as the nation continues to refill its supply buffer. The purchases, scheduled for October and November, come as the reserve is at its lowest point in 40 years.
–With assistance from David Ingles and Haslinda Amin.
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