The recent surge in oil prices was halted by the impact of lower investor sentiment in the markets in general and the indication by the United States that rebuilding the strategic petroleum reserves would take longer than previously expected.
US Energy Secretary Jennifer Granholm said Thursday that rebuilding the Strategic Petroleum Reserve this year at the administration’s target price of $70 a barrel will be “difficult.” Oil prices tracked stock markets, which underperformed overnight.
The banking crisis last week sent crude oil prices out of the $10 up-and-down range they had been stuck in for almost three months. Since then, the commodity has recouped some of its losses, posting gains for three straight sessions starting this week. For the next step; Oil may benefit from signals from US markets and economic recovery in China from “zero Covid” policy measures.
The long-term decline in oil prices is of concern
In a pessimistic price signal, the near-term Brent crude spread — a measure that tracks dealers’ willingness to buy contracts that benefit from falling prices — is near levels last seen in mid-August. Meanwhile, the pace of China’s recovery was slower than expected.
“We’re seeing brisk movement in the markets, but it’s not going all the way to pre-pandemic levels — it takes time for the buildup to happen,” said Rob Haworth, senior investment strategist at US Bank Wealth Management. And if you think back to the reopening of the economy in the United States, you will find that we reopened the economy that was followed by a flood of hyperactivity, and then everyone bounced back, and pulled back again because of the infection and its fears.”