Oil endured a choppy session as traders parsed a mixed US stockpile report while economic growth concerns continue to weigh on crude prices.
(Bloomberg) — Oil endured a choppy session as traders parsed a mixed US stockpile report while economic growth concerns continue to weigh on crude prices.
West Texas Intermediate advanced 1.7% to trade near $83 a barrel after a government report showed oil inventories rose 8.85 million barrels last week. Meanwhile, stockpiles dropped in the largest storage hub of Cushing, Oklahoma.
Crude prices collapsed to the lowest level since January on Wednesday as China faces further anti-virus lockdowns, threatening energy demand in the world’s biggest importer. Crude’s meltdown led the US benchmark to settle below its nine-day relative strength index, a technical indicator to some traders that oil is oversold and a reversal may be in store.
“Crude is trying to bounce off the lowest levels since March as the last two weeks’ selloff in prices stemmed from a perceived slowdown in both Asia and Europe with expectations that demand destruction is coming,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Crude’s tumble in recent days has seen it break out of a trading range it had been in for much of the summer. Futures have been trading below key moving averages and forming bearish technical patterns that have compounded the recent selloff. Alongside that, key timespreads are pointing to a softer market than they were several months ago.
“The rising US dollar to multi-year highs has been a big bearish factor to crude and with the Fed set to raise interest rates again, the strength looks to continue,” said Kissler. That along with China locking back down has “spooked” the energy sector.
The widely-watched prompt timespread, an indicator of market tightness, rose to trade near 48 cents in backwardation, after closing at its weakest level since January on Wednesday.
Oil’s deep loss on Wednesday came despite several supportive market factors. Russian President Vladimir Putin said the country would not supply energy to any nations that backed a planned US-led price cap on the nation’s crude. In addition, the Energy Information Administration raised its outlook for global oil demand, while also cutting the forecast for US supply.
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