Oil Rebounds From July Lows as Fed Signals Stoke Risk-On Mood
US crude stockpiles fell more than twice as much as forecast last week, according to the Energy Information Administration.
(Bloomberg) -- Oil climbed from a five-month low, rallying with broader markets after the clearest sign yet that the Federal Reserve’s aggressive rate-hiking campaign is over.
West Texas Intermediate shot up 3% to settle above $71 a barrel on Thursday. The Fed, Bank of England and European Central Bank all kept rates steady this week, sending equities near all-time highs, until they pared gains on a technical correction. The Bloomberg Dollar Spot Index tumbled to its lowest since August, making commodities priced in the currency more attractive.
Still, the broader oil market remains plagued by oversupply concerns, with key timespreads holding near the weakest level in years. While OPEC and its allies may succeed in eliminating a glut next quarter, according to the International Energy Agency, but decelerating demand growth and surging US production continue to be headwinds.
“Crude is catching a bid with the rest of risk assets,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. But a sustained rally will come from strengthening timespreads and inventory draws, she added.
Oil is still down by more than 20% from this year’s high in late September amid a surge in exports from non-OPEC countries and fears the demand outlook is worsening. The market is also skeptical whether deeper voluntary supply cuts by the Organization of Petroleum Exporting Countries and its allies will be fully adhered to.
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