Oil Prices Gain On Recovery

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Oil Prices Gain On Recovery

Oil Prices Gain $1 As Recovery Picks Pace

An increase of $1 was seen in the price of oil futures on Monday as a hurricane system is now close to the US Gulf coast. Additionally, the oil market is also going through a recovery after a sell-off rally after the release of weak US jobs data.

WTI futures gained 1.48% or around $1, while the Brent crude futures gained 1.39% or $0.99. After the increase, the WTI futures traded at nearly $68.67, while the Brent crude futures traded at $72.05.

Wti Declined By 8%

According to analysts, the recent bounce in the oil prices is a reaction to the hurricane that is about to hit the US Gulf Coast. It is important to note that around 60% of the total refining capacity of the US is in the US Gulf Coast.

So, a change in the weather situation has led to a recovery in the oil prices after the sell-off from last week. On Friday, a big 10% drop was witnessed in Brent Crude oil which took it to the lowest levels. In fact, such low prices were only seen last time in December 2021.

Similarly, an 8% decline was seen in the WTI, which took to the lowest levels, which were only seen in June 2023. So, while a small jump was seen on Monday, the oil prices remain depressed.

Amidst all of this, the oil prices are also under pressure due to a weak economic backdrop. According to analysts from ANZ, the weakness in the US labour market has cast serious doubts on the demand for oil in the country.

Last Friday, the US NFP report was released, which showed a reading of 142K, while July's reading was revised lower to 89K.

Also, the market is expecting a 25 bps (0.25%) rate cut this month by the US Federal Reserve, but it could be even higher (close to 0.50%). However, the bigger picture is that the oil demand remains weak, which will keep an upper cap on the price of oil.

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