Oil came back from a sell-off that investment banks from Goldman Sachs to Morgan Stanley said was excessive and offered an opportunity to buy, with physical crude markets still showing signs of strength in the long run.
Futures in New York rose 2.4% on Friday, after a plunge of more than 7% in the previous session. While the market may have gotten too long for its own good, the recent price weakness is likely temporary as signs remain that demand is set to recover and supplies will tighten.
“What happened yesterday is not indicative of overly soft physical markets,” said Michael Tran, an analyst at RBC Capital Markets. “The market was getting pretty stretched, so given the general headlines of China slowing to some degree, Covid returning in Europe and demand maybe not being as robust as people had thought, these are all just convenient opportunities for the market to rebase, retrench and reload heading into the summer.”
Still, prices are headed for the worst week since October. A combination of factors conspired to bring a 30%-plus rally this year to a screeching halt: Treasury yields that pushed the dollar higher, signs of weaker consumption in Asia in the short-term and the unwinding of long positions by commodity trading advisors. Technical indicators had shown a market correction was overdue.
- West Texas Intermediate for April delivery added $1.42 to settle at $61.42 a barrel in New York
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