Oil swung between gains and losses as technical resistance threatened to put a lid on last week’s supply-driven rally.
(Bloomberg) — Oil swung between gains and losses as technical resistance threatened to put a lid on last week’s supply-driven rally.
West Texas Intermediate traded little changed near $74 a barrel, swinging in a range of less than $1.25, after breaking above its 100-day moving average on Friday. Crude fell through the key technical level in late April, and it has since provided resistance to gains in prices.
Adding to bearish sentiment was Chinese data revealing 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. 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.
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.
Outlook remains mixed as the market is flashing signs of strength, and speculators have cut their bearish bets on the global benchmark and West Texas Intermediate crude. Last week, Brent rose 4.8% following a pledge by Saudi Arabia and Russia to reduce supply.
“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.
Meanwhile, 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.
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