Oil Holds Steady as Focus Shifts from Surplus Fears

Angie Gildea, US Energy Lead at KPMG, talks about how rising output and weaker demand are capping crude’s upside.

Oil steadied as a push to end the US government shutdown buoyed wider markets, with crude traders also looking toward a data-heavy week that’ll yield insights into whether a global surplus is forming.

West Texas Intermediate held near $60 a barrel after two weekly declines, while Brent traded around $64. In the US, the Senate took a major step toward reopening the US government after the longest-ever shutdown, aiding stocks as well as most commodities.

Commodity trading advisers, meanwhile, have deepened their bearish stance over the past week, according to data from Bridgeton Research Group. The robot traders are currently 63% short in both Brent and WTI, and are poised to add short positions if futures fall by roughly another one percent, the firm added.

Crude has dropped in five of the past six weeks as jitters over surplus supply gained greater traction. The Organization of the Petroleum Exporting Countries and its allies have been loosening output curbs in an apparent effort to gain market share, while drillers from outside the alliance, including the US, have also been adding barrels.

US sanctions also remain in focus after the Trump administration last month targeted Russia’s Rosneft PJSC and Lukoil PJSC in a bid to raise pressure on the Kremlin to end its war in Ukraine. The latter declared force majeure on shipments from its West Qurna 2 field in Iraq, according to a person familiar with the matter, giving it the right to skip contractual obligations. Hungary — which is reliant on Moscow for energy supplies — won an exemption from curbs on the Russian oil after talks with Washington.

Lukoil’s moves are lending mild support to futures, said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Still, fundamentals remain soft — Dubai spreads continue to weaken, Asian demand is well supplied, and both Saudi Arabia and Iraq have reduced official selling prices,” she added.

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