Oil prices rebounded after major selloff

Crude oil prices started the week with gains as traders took a break from the latest selloff and as a weather system in the Gulf of Mexico could become a hurricane before making landfall.

By mid-morning, Asia’s Brent crude was up more than 1 percent from last Friday’s close, and West Texas Intermediate was up about 1.30 percent from last week. The benchmark lost about 10 percent last week in a selloff that Bloomberg called “brutal.”

“Crude oil posted its biggest weekly drop in 11 months amid a gloomy economic backdrop. Weak US jobs data on Friday raised concerns about falling demand for oil in the world’s biggest consumer,” ANZ analysts said in a note quoted by Reuters.

The Labor Department’s latest jobs report, released Friday, showed 142,000 new jobs were added in August, which was below expectations. However, unemployment rose less than forecast in the same month, keeping alive optimism about an interest rate cut soon.

“OPEC+’s announcement to delay the start of a planned production increase signals that the producer group remains focused on balancing the market,” Morgan Stanley analysts said in a note cited by Bloomberg. “Unless demand weakens further, we estimate that Brent is likely to remain anchored in the mid-$70s.”

It’s worth noting that last week’s sell-off didn’t stop even after OPEC signaled it wouldn’t start returning supply to the market from October after all, and even after the EIA reported yet another sizable drawdown in crude inventories for the last week of August.

This week, three reports will move prices, including the latest monthly market updates from OPEC and the International Energy Agency. The Energy Information Administration is also scheduled to release its Short-Term Energy Outlook this week. OPEC and EIA will publish their reports on Tuesday. The IEA’s oil market report is due to be published on Thursday.

By Irina Slav for Oilprice.com

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