Oil jumps as a lot as 6%, snapping longest shedding streak since 2019

0
97

Pump jacks at the Belridge Oil Field and hydraulic fracking site, the fourth largest oil field in California.

Citizens of the Planet | Universal picture group | Getty Images

Oil prices rose Monday, breaking a seven-day streak of losses that was the worst in crude oil since 2019, when the dollar fell and traders bet that recent sales were exaggerated.

“The news of zero new cases in China has certainly provided a tailwind, as it brings more light and a breath of fresh air into the demand landscape at the end of the Covid tunnel,” stated analysts from Blue Line Futures. “Also, the US dollar has pulled back from its recent highs, which broadly underpins the commodity landscape.”

West Texas Intermediate’s crude oil futures, the US oil benchmark, last traded $ 3.22, or 5.2%, up at $ 65.35. Earlier in the day it rose more than 6% to hit a session high of $ 66, marking its best day since November.

The sharp jump marks a turnaround from last week when the contract fell nearly 9% for its worst weekly performance since October and the second negative of three weeks. WTI closed on Friday at its lowest level since May 20th.

The international benchmark Brent crude rose 5%, or $ 3.20, to $ 68.38 a barrel on Monday after posting its worst week since October.

The oil slump came amid fears of a slowdown in demand as the Delta variant of Covid-19 spread, resulting in new lockdowns in countries like Japan and New Zealand. In addition, weak economic data from China, the world’s largest crude oil importer, weighed on prices. The latest US inventory report also showed an increase in gasoline inventories as well as an increase in production from US manufacturers.

But some Wall Street firms said the sales looked excessive.

“We find this price weakness exaggerated and have more to do with the psychology of the market participants than with a deterioration in the fundamentals,” said the analysts at Commerzbank.

Goldman Sachs, meanwhile, said macro headwinds, including the reflationary slowdown and Covid concerns in China, are obscuring the bullish backdrop for oil and commodities in general.

“While liquidity is likely to remain low and the trend is not our friend right now, we believe the micro – the steadily rising commodity fundamentals – will trump these macro trends in the fall, propelling many markets like oil and base metals to new highs this fall Cycle, “the company wrote in a message to customers on Monday.

Energy stocks jumped on the heels of the oil surge and the group was the top performing S&P 500 sector, gaining more than 3%. Diamondback Energy and Occidental were among the top performers, up more than 6%. APA gained more than 5%.

The SPDR Oil & Gas Exploration & Production ETF and the VanEck Vectors Oil Services ETF each gained more than 4%.

The energy sector fell more than 7% last week and has yet to reclaim its place as the top performing group this year. Energy was the best sector in the first half of the year but has been hit hard in recent weeks and is now the fourth best sector for 2021, behind financial, real estate and communications services.

Did you like this article?
For exclusive stock selection, investment ideas and global CNBC livestream
Sign up for CNBC Pro
Start your free trial now