Oil extends gain as supply crunch overrides inflation concerns
BNN Bloomberg
Oil advanced, bolstered by low fuel inventories, even as concerns over how aggressively the Federal Reserve would combat inflation roiled broader markets.
West Texas Intermediate gained for a second session, rising as much as 2.3 per cent to trade above US$123 a barrel. US President Joe Biden will travel to Saudi Arabia next month and will discuss energy production, according to US National Security Counsel Coordinator John Kirby. The diplomacy efforts will come at a time of heightened risk to the global economy from decades-high inflation and record energy costs. Wall Street started the week on the back foot as traders price in steep increases in Federal Reserve interest rates.
“The fundamentals remain bullish as long as crude and gasoline storage levels remain well below the their five year averages,” said Dennis Kissler, senior vice president of trading at BOK Financial. An interest rate hike of even 75 basis points should not be a major factor for crude demand, said Kissler. A more “extreme” rate hike of 1 per cent, and the resulting impact of a stronger US dollar, is where the market could experience demand destruction, he noted.
