Oil futures rose Tuesday as U.S. traders returned from a three-day holiday weekend, with crude bouncing after recession fears saw a retreat last week.
U.S. markets were closed Monday for the Juneteenth holiday.
West Texas Intermediate crude for July delivery
which expires at the end of the session, rose $2.91, or 2.6%, to $112.47 a barrel on the New York Mercantile Exchange. The most actively traded August contract
was up $3.05, or 2.8%, at $111.04 a barrel. WTI slumped over 9% last week, ending a string of seven straight weekly advances.
July natural-gas futures
lost 1.4% to $6.847 per million British thermal units.
What’s driving the market
Crude traded near three-month highs last week before retreating as interest rate increases by the Federal Reserve and other central banks sparked worries over the potential for a recession and triggered a sharp selloff in equities and other assets.
Equities were bouncing back Tuesday though, with U.S. stock indexes making sharp gains on Wall Street.
Data on Monday, showing China significantly increased imports of Russian crude in May, were a positive for crude prices after the European Union moved to ban imports of crude from the country by sea as the West continues to tighten sanctions in response to Russia’s invasion of Ukraine.
The data showed China imported a record 2.06 million barrels a day of Russian crude in May, or around 18% of total Chinese oil imports, said Warren Patterson, head of commodities strategy at ING, in a note. That’s up from 1.33 million barrels a day, or 13% of total imports, in May 2021.
“Clearly, the large discounts available on Russian crude oil have been too tempting for Chinese buyers. In theory, the more displaced Russian oil we see going to the likes of China and India, the easier it should be for the global market to deal with the EU’s ban on Russian seaborne crude imports,” Patterson wrote.
Bearish analysts said signs of rising U.S. crude output though could signal more weakness for crude.
Data on Friday showed the number of total U.S. oil rigs rose by 7 last week to 740, while the Biden administration looks to begin refilling strategic reserves in September, “which looks like good news for producers, who can get a steady buyer from the government, potentially keeping the price from an uncontrollable decline.” noted Alex Kuptsikevich, senior market analyst at FxPro.
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“In the coming weeks, we should be prepared for a correction to $100 or even $90 with negative surprises in the global economy and a stock market crash. However, for the rest of this year and most of the next, Brent crude may stay mainly within the $90-120 range,” he wrote.