Oil Swings as Risk-On Mood Vies with Waning Geopolitical Risks
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(Bloomberg) -- Oil prices fluctuated as the prospect of looser monetary policy countered a decreasing premium for geopolitical risk.
West Texas Intermediate futures were near $82 a barrel, after earlier trading higher and lower on the day. Equities rallied after a report showed growth for US business activity was at the slowest pace this year. The weakening economic data is being interpreted as bullish for markets as traders parse clues for the Federal Reserve’s next move in its fight against inflation and the outlook for lower interest rates.
Meanwhile, a slew of crude-market gauges have signaled that traders are discounting the risk of further escalations in the Middle East. WTI’s second-month options skew has flipped back to its usual put skew, as traders are now seeking to protect against price drops. And US’s crude pierced its 50-day moving average on Tuesday for the first time since February, a move that could lead to additional selling.
After a bout of volatility, prices remain shy of their yearly highs ahead of the US summer travel season that typically brings a swell of fuel demand. That has many analysts expecting further gains for prices later this year, even after a recent pullback. Traders are also turning their focus to the OPEC+ alliance’s next meeting on production, with the group’s recent supply cuts leading to a tighter market.
Futures are coming off back-to-back weekly losses, but remain higher this year amid geopolitical risks in the Middle East. The US Congress has moved to further curb Iran’s oil sector, though analysts anticipate a muted impact on exports.
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