Oil Jumps by Most Since March as Virus Wanes In China

Brent oil edged higher after capping the longest run of declines in more than three years amid economic strains.

Sheela Tobben

25 Aug 2021, 12:22 AM IST

Oil Jumps by Most Since March as Virus Wanes In China

An employee displays a bottle of crude oil taken for testing. (Photographer: Heidi Wideroe/Bloomberg)

(Bloomberg) -- Oil rose the most in five months, buoyed by a broader market rebound and signs of progress in stemming the pandemic’s spread.

U.S. crude futures climbed 5.6% in New York on Monday, the biggest one-day advance since March. With concerns about China’s wealth crackdown easing, investors rushed into stocks and commodities. Meanwhile, the world’s most populous nation quashed domestic virus cases to zero while U.S. regulators granted full approval to the nation’s most widely used Covid-19 vaccine.

“Today is a big snap back,” said Leo Mariani of KeyBanc Capital Markets Inc.

Oil’s scorching rally over the first half of the year ran into stiff headwinds in recent weeks on concerns the resurgent virus could prompt OPEC and its allies to pull back on supply increases. Traders will be watching the Federal Reserve’s annual Jackson Hole symposium that starts later this week for clues to any changes in policy by central bankers.

“We’ve seen quite some pressure in recent weeks with Covid dominating headlines again,” said Hans van Cleef, senior energy economist at ABN Amro Bank. “So that could also explain a big part of today’s support. Bargain hunting and a spillover from the positive sentiment in other asset classes.”

Prices
West Texas Intermediate for October delivery gained $3.50 to settle at $65.64 a barrel in New York Brent for October settlement rose $3.57 to $68.75

The delta variant has also weakened the oil futures curve. The prompt timespread for Brent was 44 cents a barrel in backwardation -- where near-dated contracts are more expensive than later-dated ones. That compares with 92 cents at the end of July. Goldman Sachs Group Inc. said in a note that prices had “overshot timespreads to the downside, suggesting an oversold market.”

Other market news:
Libya needs to boost oil output by almost 40% of its current level in order to cover its spending needs and begin revamping an economy battered by war, the nation’s central bank governor said. A fire broke out at a Petroleos Mexicanos offshore platform in the Gulf of Mexico, according to a statement from the state oil company. The U.S. Department of Energy is offering up to 20m bbl from its Strategic Petroleum Reserve, according to statement.

Other market news:

Libya needs to boost oil output by almost 40% of its current level in order to cover its spending needs and begin revamping an economy battered by war, the nation’s central bank governor said.
A fire broke out at a Petroleos Mexicanos offshore platform in the Gulf of Mexico, according to a statement from the state oil company.
The U.S. Department of Energy is offering up to 20m bbl from its Strategic Petroleum Reserve, according to statement.