Oil’s Rebound Falters Amid Clouded Outlook for Fundamentals
(Bloomberg) -- Oil’s rebound, which some traders attributed largely to technical supports, faltered on Friday amid a cloudy outlook for crude’s fundamentals.
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West Texas Intermediate slid more than 1% to settle near $78 a barrel after earlier rising close to $80. Prices even fell below the 100-day moving average of around $78.37, which had acted as a floor for this week after a monthlong selloff. Traders are still grappling with a mixed US inventory report that showed overall stockpiles dropping while signs of fuels demand lagged.
The Organization of Petroleum Exporting Countries and its allies are meeting early next month to decide on output in the second half, a move that could serve as the next major catalyst for oil.
“All eyes are now on OPEC, so we’re likely to stay rangebound over the next couple of weeks,” said Frank Monkam, senior portfolio manager at Antimo.
Crude’s latest gains mask relatively muted price moves, with futures logging their smallest weekly trading range since March. Prices have shed much of the premium from the heightened tensions in the Middle East, with the focus shifting to an apparent oversupply of some types of crude.
Market gauges are also reflecting oil’s ambiguous fundamental outlook. The profitability of turning crude into fuels such as gasoline has dwindled to the lowest premium since February. Option skews continue to show a bias toward puts, which profit from lower prices.
Still, WTI’s prompt spread — the gap between the two nearest contracts — is 50 cents a barrel in the bullish market structure of backwardation. That’s little changed over the week, but lower than a month ago, when it was close to $1.
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