US oil rises 2%, briefly breaks above $60 as supply cuts outweigh economic worry

Oil rose sharply on Tuesday as OPEC supply cuts and expectations of lower U.S. inventories outweighed concern about weaker demand due to an economic slowdown.

The price of global benchmark Brent crude has risen about 25 percent in 2019, supported by supply curbs by the Organization of the Petroleum Exporting Countries plus allies, and involuntary losses due to U.S. sanctions on Iran and Venezuela.

Brent was up 72 cents at $67.93 a barrel, not far from its 2019 high of $68.69 reached on March 21. U.S. crude added $1.16, or 2 percent to trade at $59.98. WTI traded above $60 earlier in the day.

“It appears that concerns about demand have taken something of a back seat,” Commerzbank analyst Carsten Fritsch said. “Instead, market participants are focusing on the tight supply situation again.”

Expectations of a further drop in U.S. inventories also supported prices, suggesting the OPEC-led curbs were helping to avert a buildup of excess supplies.

The first of this week’s supply reports, from the American Petroleum Institute, is due at 2030 GMT. U.S. crude inventories are forecast to have fallen by 2.4 million barrels in what would be a third straight weekly decline.

Further price support came from another power cut in Venezuela, the second to hit the OPEC nation this month, raising concern about the country’s oil exports.

Worries about demand have limited oil’s rally as manufacturing data from Asia, Europe and the United States pointed to an economic slowdown, although bullish bets by some investors are rising.

“So far, demand concerns have not proven too much of a headwind,” analysts at JBC Energy wrote.

Investor concern over the global economy had intensified on Friday after disappointing German and U.S. factory data led to an inversion of the U.S. Treasury yield curve, which some see as a leading indicator of recession.

“Recession risks have risen to the highest since 2008,” said Ole Hansen, head of commodity strategy at Saxo Bank.

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya