Oil edges lower after stellar run as bullish momentum cools

Oil declined after rallying almost 10 per cent over the past two weeks, with technical indicators suggesting recent gains may have been overdone.

West Texas Intermediate fell to about $87 a barrel after a 2.3 per cent advance last week. Technical gauges including the relative strength index suggest futures remain overbought. Oil has surged by almost US$20 a barrel since mid-June on production cuts from Saudi Arabia and Russia, which have now been extended through the end of the year.

Despite Monday’s retracement, there’s still signs of oil market bullishness. Money managers hold the biggest net-long position in WTI for 15 months, while they also added to bets for Brent gains last week. That came as OPEC+ leaders Saudi Arabia and Russia pledged to extend supply curtailments.

“Producers are keeping it tight in the tug of war over energy prices,” Barclays Plc analyst Amarpreet Singh wrote in a note. “With Saudi Arabia more aggressive than expected with its unilateral cut and continuing strength in demand, we caution against fading the recent run-up.”