Oil rose nearly 3% on Monday as recession fears in the United States eased, and some traders believe crude’s recent price decline was overdone, with three consecutive weekly declines for the first time since November.
A strong April jobs report in the United States boosted oil prices by about 4% on Friday, despite the fact that labour market strength may force the Federal Reserve to keep interest rates higher for longer.
By 1200 GMT, Brent crude was up $1.83, or 2.4%, to $77.13 per barrel. West Texas Intermediate (WTI) crude in the United States rose $2.06, or 2.9%, to $73.40.
“Oil’s rebound follows energy stocks’ comeback on Wall Street last Friday after the U.S. reported strong job data, which eased concerns about an imminent economic recession,” said CMC Markets analyst Tina Teng.
Brent had finished last week with a decline of about 5.3% while U.S. crude plunged by 7.1% even after Friday’s rebound. Both benchmarks were down for three weeks in a row for the first time since November.
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Ole Hansen, head of commodity strategy at Saxo Bank, said oil’s recent drop looked excessive.
“An oversold market condition combined with Brent managing to find support ahead of the March low forced recently established short sellers to seek cover, potentially highlighting that the recent sell-off was overdone,” he said.
Goldman Sachs analysts on Saturday said that concerns over near-term demand and elevated supplies were “overblown”.
A round of voluntary output cuts by some members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, begin this month and the group holds its next meeting on June 4.
Before then, U.S. consumer price inflation figures for April will be in focus on Wednesday, potentially influencing the Fed’s stance on future interest rate decisions.
OPEC’s latest monthly oil market report is due on Thursday, providing an updated reading on the demand and supply outlook.
