US crude prices improved Monday, snapping a seven-day losing session. This was crude oil’s worst performance since 2019. However, a string of good news brought a much-awaited uptick in the price of a valued commodity.
West Texas Intermediate Crude Prices
Crude prices for West Texas Intermediate futures rose by 5.6% to close at $65.64 per barrel. West Texas crude remains the United States benchmark for oil prices.
Earlier during the trading session, the price hit an intraday high of $66. Meanwhile, international benchmark Brent crude went up by 5.48% to close at $68.75 per barrel on Monday.
In contrast, crude prices languished much of last week, as contract values receded by almost 9%. This represents oil’s worst weekly performance since October last year.
It was also the second negative week of declining oil prices during the last three weeks. In fact, last Friday saw West Texas Intermediate closing at its lowest levels since May 20. In addition, last week also saw Brent post its worst week since October.
What Caused Crude Prices To Increase?
Analysts offered at least two developments that pushed oil prices to go up. Blue Line Futures analysts pointed to an improving COVID landscape in China. “News of zero new cases in China has certainly provided a tailwind as it gives added light at the end of the Covid tunnel and a breath of fresh air to the demand landscape,” noted Blue Line Futures.
In addition, the analysts also pointed to the US dollar’s pullback from the recent highs it posted. This development underpinned the commodity landscape broadly, leading to increased oil activity.
Meanwhile, Goldman Sachs agreed that the dollar’s slide and China’s COVID concerns are tempering bullish activity for oil and commodities more generally. “While liquidity will likely remain low and the trend is not our friend right now, we believe the micro — steadily tightening commodity fundamentals — will trump these macro trends as we move toward autumn, pushing many markets like oil and base metals to new highs for this cycle,” the firm wrote to clients.
Excessive Price Weakness
Experts attributed the recent decrease in crude prices to fears of a COVID resurgence and an eventual lockdown. In addition, the latest US inventory report showed increased levels of gasoline stocks as local producers also increased their output. Add the weak economic data coming out of China, and the result was sliding oil prices last week.
Some financial executives think the reaction was too much. Commerzbank analysts said the lower price has more to do with overreaction. “We find this price weakness excessive and believe it has more to do with the psychology of market participants than with any deterioration of fundamental data,” noted analysts at Commerzbank.
Energy Sector Stocks Jump As Investors Cheer Rising Crude Prices
The market responded positively to news about rising oil prices. Energy stocks jumped high enough to make the sector the top gainer in the S&P 500.
Overall, the energy sector rose #% during yesterday’s trading. Among the winners were Diamondback Energy and Occidental wast they posted stock price gains of more than 6%.
Watch the Yahoo Finance video reporting that Oil demand is reverting back to pre-COVID times, according to Vandana Insights CEO:
What do you think of rising crude prices? Are they a good sign of a bullish economy? Or, will they have an opposite effect? Share your comments in the comments section below.