Oil’s rally ran out of steam after a report showed that US job openings in February fell to the lowest since 2021, reigniting concerns over a global economic slowdown.
(Bloomberg) — Oil’s rally ran out of steam after a report showed that US job openings in February fell to the lowest since 2021, reigniting concerns over a global economic slowdown.
West Texas Intermediate edged lower to trade around $80 a barrel. Before the US economic report, prices had extended the largest rally in a year after the Organization of Petroleum Exporting Countries and its allies slashed crude production by over 1 million barrels a day.
However, the startled jump in prices Monday after the surprise cut may have been “over-exaggerated,” especially if it’s not accompanied by an uptick in demand, said Dennis Kissler, senior vice president of trading at BOK Financial Securities. Wall Street’s mixed reaction reflected a similar ambivalence.
While uber-bull Goldman Sachs Group Inc. upgraded their price forecasts in the wake of the decision, Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. kept price forecasts unchanged Morgan Stanley even lowered its outlook, noting China’s demand growth has lagged behind expectations.
Crude has soared about 20% from the low point in mid-March. The rebound was driven initially by expectations Chinese demand would pick up following the end of restrictive Covid policies. The OPEC+ surprise decision allowed markets to rally the most in a year, with the move being aimed to punish speculators that bet oil prices would fall.
On the economic front, there’s concern that the production cuts will reinvigorate inflation, with US Treasury Secretary Janet Yellen criticizing the group’s decision as “unconstructive.” Still, President Joe Biden downplayed the issue, saying late on Monday its impact is likely not “as bad as you think.”
The market largely ignored the potential resumption of oil exports from Iraq’s semi-autonomous Kurdistan region on Tuesday. The region’s government said it will sign an agreement that may clear the path to restart shipments via the Turkish port of Ceyhan. About 400,000 barrels a day of flows have been halted following a legal dispute.
–With assistance from Natalia Kniazhevich.
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