‘Overbought’ oil down 2%’; more downside likely if bond selloff continues
Investing.com — “When push comes to shove” — the phrase seems to be making itself evident with the oil market, where the sharpest correction in nearly two months occurred on Thursday on overbought crude futures that have risen more than 30% since the end of May.
The so-called profit-taking pulled New York-traded West Texas Intermediate and London’s Brent from latest highs above $95 per barrel that marked a near 13-month peak for U.S. crude and a 10-month high for the U.K. benchmark.
Analysts said the possibility of the correction continuing was as high as the oil rally restarting.
“Unless a major de-risking moment occurs, the oil market will still remain tight throughout the rest of the year,” Ed Moya, analyst at online trading platform OANDA, said.
Still, he acknowledged that “oil was ripe for a pullback”, after coming a few dollars short of the $100 level, and risk of downside was open if the worldwide selloff in bonds — a precursor to recession — continues.
“Energy traders are quickly locking in profits given the turbulence happening in the bond market. Crude demand destruction will clearly happen globally if this bond market selloff extends,” added Moya.
Moya put major support for Brent at $87.75 and WTI at $84. That would mean a downside of another $5 to $7 in both the benchmarks if de-risking extends.
WTI for delivery in November settled at $91.71 per barrel, down $1.97, or 2.1%, on the day. It earlier reached $95.04, its highest since August 2022. On Wednesday alone the U.S, crude benchmark jumped 3.7%.
London-traded Brent for December delivery settled at $93.10 a barrel. That was down $1.26, or 1.3%, on the day. On Wednesday, it rose 2.1%.
Oil prices have gained between $25 and $30 from May lows of beneath
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