Oil Prices Rise on Technical Correction

Oil rose with a technical correction to the upside after last week’s slide, aided by supply disruptions in Canada and positive fuel demand indications.

West Texas Intermediate rose as much as 3% on Monday to close above $73 a barrel amid various supportive factors. Several oil producers in Alberta have shut in almost 150,000 barrels a day because of wildfires, while in the US better-than-expected employment data on Friday eased concerns of an economic slowdown. 

“The jobs numbers are certainly helping,” said Paul Horsnell, head of commodities research at Standard Chartered Bank. “But occasionally, the answer to why the price has gone up is the simple one: that it was too low.”

Oil has dropped by about 10% this year as the Federal Reserve’s most aggressive tightening campaign in a generation sparks recessionary fears. Market participants have become more bearish, with money managers boosting bets that Brent prices will fall by the most since last March.

But a spate of speculative short selling can’t really be justified by either macro-economic data or oil fundamentals, so the market was due a correction, Horsnell added. Physical demand signals also suggest the weakness in prices was overdone. The amount of crude held around the world on stationary tankers dropped to the lowest since mid-February, Vortexa data show. 

The rebound in diesel and gasoline also helped propel oil prices higher said Rebecca Babin, a senior energy trader at CIBC Private Wealth. Both fuels outperformed crude, while refining margins have started to rebound from recent lows.

Prices:

• WTI for June delivery rose $1.82 to settle at  $73.16 a barrel in New York.
• Brent for July settlement increased $1.71 to settle at $77.01 a barrel.