Oil rose in a choppy trading session as equity markets pared losses, shrugging off concerns of an economic recession.
West Texas Intermediate settled near $112 a barrel after trading in a $7 range on Thursday. Earlier, investors shied away from equities after Federal Reserve officials reaffirmed much tighter monetary policy lies ahead to cool an overheating economy and tame inflation.
Oil prices are up more than 40% this year amid strength in product markets, lower global inventories, and record gasoline prices. US crude data revealed continued market tightness with gasoline inventories falling to the lowest since December and a pickup in demand.
“Oil markets remain a volatile trade as crude demand destruction concerns intensify,” said Ed Moya, senior market analyst at Oanda. Despite the recession concerns, the oil market remains tight and fears of large dent in “short-term crude demand outlook is overdone.”
Crude’s outlook has also been clouded as China struggles to contain a wave of Covid-19 infections. While the financial center of Shanghai has begun to emerge from a punishing lockdown, there have been fresh outbreaks in other cities and disruption in Beijing. The country is the world’s largest oil importer.
An explosion was reported at the Ulsan refinery in South Korea which has a capacity of 580,000 barrels a day. Gasoline futures rose 3%. The explosion injured eight workers, the Yonhap News Agency reported.
- WTI for June delivery rose $2.62 to settle at $112.21 a barrel in New York.
- Brent for July settlement rose $2.93 to settle at $112.04 a barrel
Oil markets remain in backwardation, a bullish pattern marked by near-term prices trading above longer-dated ones. Brent’s prompt spread — the difference between its two nearest contracts — was $2.24 a barrel in backwardation, compared with $1.46 a week ago.
(with assistance from Paul Burkhardt)