Gas storage tanks at the RN-Tuapsinsky refinery, operated by Rosneft Oil Co., in Tuapse, Russia, Monday, March 23, 2020. Oil fell on Monday, reversing earlier gains but continuing a recent run of losses, amid concerns that an expected rise in interest rates in the US, the world’s largest oil user, may limit fuel demand growth.
Andrei Rudakov | Bloomberg | Getty Images
Oil prices rose on Monday, boosted by a slightly weaker U.S. dollar and stronger equity markets in a session that oscillated between supply fears and expectations that rising rates of US interest weakens demand for fuel.
Brent crude futures for September settlement rose $1.72, or 1.7%, to $104.91 a barrel, while U.S. West Texas Intermediate (WTI) crude futures up 1.7% to $96.33 a barrel.
“A slightly weaker US 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 possibility of further interest rate hikes, which could limit economic activity and thus reduce fuel demand growth, in the face of tight supply disruptions in Russian crude trade due to Western sanctions amid the Ukraine conflict.
“Growing fears of a global recession suggest that gains are likely to be limited in the near term, geopolitics aside,” said Jeffrey Halley, senior market analyst at OANDA.
Fed officials have indicated the central bank would likely raise rates by 75 basis points at its July 26-27 meeting.
China, the world’s second-largest economy, narrowly missed a contraction in the second quarter, growing just 0.4% year-on-year.
But a strong premium in the first month compared to the second month still indicates a short-term supply constraint. The spread settled at $4.82/bbl on Friday, an all-time high if you exclude the expiration-related spikes of the previous two months.
Libya’s National Oil Corporation (NOC) said it aimed to bring output back to 1.2 million barrels per day (bpd) within two weeks, from about 860,000 bpd.
But analysts expect Libyan output to remain volatile as tensions remain high after clashes between rival political factions over the weekend.
The continued tight supply also follows “expectations that Russian oil supplies will decline in the coming months as widely expected plans for a price cap on Russian oil may have the opposite effect on oil prices than was expected,” said Warren Patterson, head of commodities. strategy at ING.
The European Union said last week it would allow Russian state companies to send oil to third countries under an adjustment to sanctions agreed by member states last week aimed at limiting 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 their oil.