Oil rebounds after brutal week

September 09, 2024 (MLN):  Oil rose from its lowest close since 2021, clawing back some of last week’s deep decline as the focus shifts to key reports on the market’s outlook.

Brent climbed toward $71.5 a barrel after losing 8% last week, while West Texas Intermediate traded above $68.

Oil’s recent plunge has been driven by signs of slowdowns in the US and China, endangering demand at a time of abundant supply, Bloomberg reported.

At a major oil conference in Asia on Monday, top traders struck a cautious note. Trafigura Group said Brent crude is probably heading into the $60s soon and Gunvor Group Ltd. sees supply outpacing demand.

Meanwhile, Morgan Stanley cut its forecasts for the second time in a matter of weeks and speculators now have record-low bullish wagers on crude prices.

Traders will get plenty of market insights this week as three prominent forecasters — OPEC, the Energy Information Administration and the International Energy Agency — publish monthly outlooks.

Crude has tumbled over the past three weeks as the broader market mood became more bearish, joining other commodities and equities in a wide selloff that’s spooked investors.

There has also been widespread softness in product markets, including US gasoline and European diesel. The weakness prompted OPEC+ to defer a plan to relax supply curbs by two months.

“In oil the fundamental physical picture is still intact, inventories are drawing,” Jeff Currie, chief strategy officer at Carlyle Group’s Energy Pathways said in a Bloomberg TV interview. “The financial market, however, is where the bearishness is and it’s trading the forward outlook, not today.”

The start-of-week gain came despite a decision by Saudi Arabia to cut pricing of its flagship grade for its main market in Asia next month, reflecting the poor demand outlook.

State-owned Saudi Aramco lowered the official selling price of Arab Light for buyers in Asia by 70 cents to $1.30 a barrel against the regional benchmark, according to a price list seen by Bloomberg.

Weather concerns have also emerged, posing potential risks to supply.

A storm system in the Gulf of Mexico is forecast to strengthen into a hurricane early this week, and it could threaten offshore oil and natural gas output, potentially pausing production and forcing the evacuation of crews.

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