Oil climbed more than $1 on Monday, returning to positive territory in volatile trade as markets were roiled by stock market sell-offs on fears of a U.S. recession, but declines were limited by possible supply cuts because of spreading conflict in the Middle East.
Equities markets tumbled around the world as investors rushed from risk assets while wagering that rapid interest rate cuts will be needed to drive U.S. economic growth.
Brent crude futures were up 11 cents, or 0.14%, at $76.92 a barrel by 11:15 a.m. CDT (1615 GMT), with prices earlier trading around their lowest since January. U.S. West Texas Intermediate crude was up 2 cents, or 0.03%, at $73.54.
Supply concerns limited losses early in the day. Libya’s biggest oil field, Sharara, has fully halted output, Bloomberg reported. Two field engineers told Reuters on Saturday that local protesters had partially shut down the site.
U.S. recession concerns stoked by Friday’s weak July jobs report weakened traders’ confidence on Monday.
“The oil and product trade is going to be cautious as the market tries to get a handle on how bad the global market meltdown is going to be,” wrote Phil Flynn, senior market analyst for Price Futures Group.
Slumping diesel consumption in China, the world’s biggest contributor to oil demand growth, is also weighing on oil. The decline in oil prices closely trailed falls in European stock markets.
Oil’s losses were also limited by geopolitical risks in the Middle East. Fighting in Gaza continued on Sunday, a day after an unsuccessful round of ceasefire talks in Cairo.
Israel and the U.S. are bracing for a serious escalation in the region after Iran and its allies Hamas and Hezbollah pledged to retaliate against Israel for the killings of Hamas leader Ismail Haniyeh and a top Hezbollah military commander last week.
“The risk of a wider regional war, while I still think is small, can’t be ignored,” said Tony Sycamore, a Sydney-based market analyst at IG. (Reuters)
