Oil rises two per cent on post-Brexit bargain hunting, Norway strike
Oil prices rose two per cent on Tuesday with investors taking advantage to buy back into the market after a two-day rout triggered by Britain’s vote to leave the European Union.
Potential oil supply outages and crude inventory drawdowns also returned investors’ attention to market fundamentals.
A looming strike at several Norwegian oil and gas fields that threatened output in western Europe’s biggest producer helped put a floor beneath crude futures after an 8 percent price slump over two days.
Investors were also counting on a sizeable and a sixth weekly drop in U.S. crude stockpiles, with oil market analysts polled by Reuters forecasting a 2.4 million-barrel drawdown.
Trade group The American Petroleum Institute will issue a preliminary report on crude inventories at 4:30 p.m. EDT (2030 GMT), ahead of official stockpiles data from the U.S. government on Wednesday.
“Oil is recovering on some bargain hunting after the drop below $47 a barrel proved unsustainable and (on) news of a possible strike in Norwegian oil and gas industry,” said Commerzbank analyst Carsten Fritsch.
Brent crude futures were up two percent, or 96 cents, at $48.12 per barrel by 1:05 p.m. EDT.
U.S. crude rose 2.4 per cent, or 1.10, to $47.43.
The benchmarks fell nearly $4 a barrel in the past two sessions, with Brent hitting seven-week lows under $47 and U.S. crude a one-month trough below $46.
Tuesday’s recovery came as the dollar retreated from three-month highs, making greenback-denominated crude more attractive to holders of the euro and other currencies.
Some analysts were wary, saying more evidence of fundamental strength was needed to assure the market was on the path to a sustainable rally.
Data showed oil production out of Nigeria, the focus of much supply outages over the past few months due to rebel attacks on oil infrastructure there, was back up at around 1.9 million barrels per day from an early June low of 1.6 million bpd.
“So far, I would categorize today’s current move higher as a corrective move after the strong push lower since last Thursday,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said, pinning a neutral to slightly bearish view on crude prices.
“More time is needed to safely say the down move in oil is officially over.”
Fawad Razaqzada, technical analyst at forex.com, said a break below $44 for U.S. crude “would probably signal the end of the still-bullish trend.”