Oil prices rise in seesaw trading
Oil futures have been volatile recently as traders gauged possible rate hikes
Oil prices rose on Monday in seesaw trading as the market balanced supply fears with expectations that rise in U. S. interest rates would weaken fuel demand.
Brent crude futures for September settlement rose 79 cents, or 0.77%, to $103.99 a barrel by 1050 GMT, while U. S. West Texas Intermediate (WTI) crude futures rose 82 cents, or 0.87%, to $95.52 a barrel.
“A slightly weaker U.S. dollar and improving equity markets are supporting oil,” UBS oil analyst Giovanni Staunovo said on Monday.
Oil futures have been volatile in recent weeks as traders have tried to reconcile the possibilities of further interest rate hikes, which could limit economic activity and thus cut fuel demand growth, against tight supply from disruptions in trading of Russian barrels because of Western sanctions amid the Ukraine conflict.
“Rising recession fears globally do suggest that gains are likely to be limited in the shorter term, geopolitics aside,” said Jeffrey Halley, a senior market analyst at OANDA.
Officials at the Fed have indicated that the central bank would likely raise rates by 75 basis points at its July 26-27 meeting.
China, the world’s secondbiggest economy, narrowly missed a contraction in the second quarter, growing just 0.4% year-on-year, weighed down by Covid-19 lockdowns, a weak property sector and cautious consumer sentiment.
But steep backwardation between inter-month spreads continue to signal near-term supply tightness. In a backwardated market, front-month prices are higher than those in future months.
The spread settled at $4.82/ bbl on Friday, an all-time high when excluding expiry-related spikes in the two previous months.
Libya’s National Oil Corporation (NOC) aims to bring back production to 1.2 million barrels per day ( bpd) in two weeks, from around 860,000 bpd, NOC said in a statement early on Saturday.
But analysts expect Libya’s output to remain volatile as tensions are still high.
Continued tight supply also follows “expectations that Russian oil supply will edge lower in the months ahead as widelyexpected plans for a price cap on Russian oil may have the opposite effect on oil prices than hoped for,” said Warren Patterson, head of commodities strategy at ING.
The European Union said last week that it would allow Russian state-owned companies to ship oil to third countries under an adjustment of sanctions agreed by member states last week aimed at limiting the risks to global energy security.
However, Russian Central Bank Governor Elvira Nabiullina said on Friday that Russia would not supply oil to countries that decided to impose a price cap on its oil.
Meanwhile, gold inched higher on Monday, buoyed by a slight dip in the dollar and lower bond yields with investors expecting the Federal Reserve to raise benchmark interest rate by 75 basis points later this week.
Spot gold was up 0.1% at $ 1,728.89 per ounce by 1150 GMT. U.S. gold futures eased 0.1% to $1,726.50.
The dollar index edged 0.4% lower, making greenbackpriced bullion less expensive for overseas buyers.
Gold is finding support from the weakness in the dollar and global bond yields as worries about the global economy have replaced inflation fears, said Fawad Razaqzada, market analyst at City Index.
Although gold is considered a hedge against inflation, rising interest rates reduce the appeal of the non-yielding asset.
Gold prices have dropped more than $350, since climbing past the $2,000-per-ounce level in early March, due to the Fed’s rapid rate hikes and the dollar’s recent rally.
Top consumer China’s net gold imports via Hong Kong jumped almost fivefold in June as banks stepped up purchases and Covid curbs were relaxed.
Spot silver rose 0.2% to $18.62 per ounce.