Oil prices rallied strongly, closing back above €100 in a week as heightened concerns over gas flows in Europe following Gazprom’s “force majeure” plea and a weaker dollar offset fears about crude demand due to an impending recession and lockdowns in China.
Specifically, the September Brent contract jumped 5.11% and is trading at $106 a barrel.
Similarly, US WTI August crude oil rose 5.1% to $102.6 a barrel.
Both closed above 100 euros for the first time in a week.
Natural gas for August delivery, meanwhile, rose 6.6% to $7.479 per British thermal unit, its highest close since June 13.
Crude prices have been trading lower since mid-June amid growing concerns about a possible recession that would dampen demand. The sharp retreat saw both WTI and Brent dip below the $100 a barrel mark, with the US benchmark at one point last week temporarily erasing gains stemming from Russia’s invasion of Ukraine on 24 February.
A four-day Middle East tour by US President Joe Biden that included meetings with Saudi Crown Prince Mohammed bin Salman and King Salman bin Abdulaziz failed to deliver on any promise to increase oil production. Reuters reported that Washington was holding out hope for an Aug. 3 meeting of OPEC+ — the Organization of the Petroleum Exporting Countries and its allies.
“Traders got a clear message from Biden’s recent visit to Saudi Arabia, during which President Biden spoke with several Arab leaders. The message is that OPEC+ is the one making the decision on oil supply and the cartel is not cares at all about what Biden is trying to accomplish,” Naeem Aslam, chief market analyst at AvaTrade, said in a note to clients.
“OPEC+ will continue to control oil supply and one country alone cannot determine oil supply — at least that’s the message traders got from Biden’s visit to Saudi Arabia,” Aslam added. “Brent oil prices broke above the $100 price level earlier today and if the price continues to trade above this price level, then it is very likely that the path of least resistance will be skewed to the upside.”
Meanwhile, a top White House energy adviser, Amos Hochstein, said Sunday that U.S. gasoline prices will continue to fall in the coming weeks to about $4 a gallon, on average, after peaking above 5 dollars a gallon in June. He added that the Biden administration’s measures amid “emergency circumstances” are working.
Selling by speculators and hedge funds slowed in the week to July 12, according to the latest Commitment of Traders update from the US Commodity Futures Trading Commission, Saxo Bank noted. “Speculators became net buyers of crude oil, copper and sugar with selling concentrated in natural gas, soybeans, corn, wheat and coffee,” Saxo told clients in a note.
In the energy complex, natural gas futures posted the biggest percentage gains on Monday. Russian energy giant Gazprom has invoked “force majeure” over reduced gas flows to Europe. Specifically, as it states in letters to at least three of its clients – one of which is the operator in Germany Uniper – Gazprom cannot fulfill its logistics obligations due to “extraordinary” circumstances beyond its control.
Source: Capital
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