Oil’s seven-week rally, driven by increasing signs of a tightening market, paused near the highest levels of the year as technical barriers stalled further advances.
(Bloomberg) — Oil’s seven-week rally, driven by increasing signs of a tightening market, paused near the highest levels of the year as technical barriers stalled further advances.
Crude has climbed about 20% since late June as OPEC and its allies cut production, and the cartel’s newest monthly report shows the market on track for a deficit of 2 million barrels a day this quarter. Crude prompt spreads have widened to the largest backwardation since November, and options markets also turned more bullish.
Still, concerns about potentially weakening consumption have capped the gains, and West Texas Intermediate settled in overbought territory on a nine-day basis for the first time in three sessions on Wednesday. WTI futures edged lower to trade near $83 a barrel after climbing 3% over the previous two sessions.
“Funds have been heavy buyers the past three weeks, and they look to be pausing here for verification that the strong demand will continue,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.
Meanwhile, increased geopolitical pressures are adding to supply insecurities. Tensions between Kyiv and Moscow heightened after a Ukrainian drone attacked a Russian-flagged oil tanker over the weekend in the Black Sea, a key waterway for the nation’s exports.
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