Crude oil climbed 2% Monday, as bottom-feeding buyers swooped in after major benchmarks last week traded at their lowest levels in six months on worries about the demand outlook.
Front-month WTI crude (CL1:COM) for September delivery closed +1.9% to $90.76/bbl, after dropping below $90 last week for the first time since Russia invaded Ukraine, while October Brent crude (CO1:COM) settled +1.8% at $96.65/bbl.
ETFs: (NYSEARCA:USO), (UCO), (SCO), (BNO), (DBO), (USL)
Market bulls argued that Friday’s much stronger than expected U.S. jobs report for July warranted a shift in market focus back toward supply, as the “blockbuster jobs number flew in the face of those that are predicting a deep recession,” Price Futures analyst Phil Flynn wrote.
Some speculators were said to be jumping on the newly-passed climate bill bandwagon to take advantage of beaten-down barrels, a move Mizuho analysts found “rather ironic considering the legislation is largely meant to replace fossil fuels.”
Investors also were weighing U.S.-Iran nuclear deal talks, as Bloomberg reported Monday that the two countries have “a matter of weeks” to decide whether to accept a revival of the 2015 agreement, citing European officials with knowledge of the negotiations.
Goldman Sachs analysts said the case for higher oil prices remains strong with current supply shortfalls well above expectations in recent months, despite crude’s recent retreat.
The oil market will remain in unsustainable deficits at current prices, and balancing it will still require “demand destruction on top of the ongoing economic slowdown,” the bank said.
Goldman trimmed its Brent price forecasts for Q3 and Q4 to $110/bbl and $125/bbl, respectively, from prior forecasts of $140 and $130, while keeping its 2023 outlook of $125/bbl unchanged.
Meanwhile, U.S. natural gas futures fell 6% Monday amid forecasts for slightly cooler weather during the next two weeks.