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

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street 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 CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya