Oil rose as reassurances that the federal government will work to contain the banking crisis brought some investors back to risk assets, snapping a string of sessions where the commodity traded in oversold territory.
(Bloomberg) — Oil rose as reassurances that the federal government will work to contain the banking crisis brought some investors back to risk assets, snapping a string of sessions where the commodity traded in oversold territory.
US officials are examining ways to expand protection for all deposits to increase confidence in the financial system, and markets are betting the Fed will slow the pace of monetary tightening at its meeting on Wednesday. Adding to bullish sentiment, Russia extended its 500,000-barrel-a-day crude output cut through June.
Oil in New York edged higher to trade near $69 a barrel after settling oversold on the nine-day relative strength index for five sessions.
Oil prices had been range-bound this year before breaking lower as banking turmoil magnified global recession fears. The resilience of Russian crude flows and questions about the strength of China’s economic recovery also have weighed on prices.
For traders to turn more thoroughly bullish, they need assurances that US demand won’t take a significant hit and that demand from China will continue to grow, said Dennis Kissler, senior vice president of trading at BOK Financial Securities.
“It seems now supply is more of a constant and demand has become more inelastic, which is keeping crude in a volatile trading pattern,” Kissler said.
Despite the recent leg lower, top oil traders forecast crude will rally because of rising demand and tight supply. Senior figures in the industry have predicted prices in the second half ranging from $80 to $140 a barrel.
READ: Top Oil Traders Say Crude Prices Won’t Stay Down for Long
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