Oil Holds Biggest Gain Since March Ahead of OPEC Market Report

(Bloomberg) -- Oil held the biggest jump since March ahead of an OPEC report that will provide a snapshot on the market outlook.

Brent traded below $82 a barrel after surging 2.5% on Monday, while West Texas Intermediate was near $78. The OPEC report will be followed by a Short-Term Energy Outlook from the US later on Tuesday, and a monthly release from the International Energy Agency on Wednesday.

Crude rallied on Monday as traders decided to “buy the dip” after the biggest weekly loss since early May following a decision by OPEC+ to restore some supply this year. The selloff prompted the group to clarify it could pause or reverse production changes if needed. 

Oil has trended lower since early April on concerns about demand and swelling supply from outside of the Organization of the Petroleum Exporting Countries. Output from Russia last month stayed above a level the country had pledged to OPEC+, even as it made the deepest cuts in over a year.

Still, timespreads are indicating some degree of strength, with Brent’s three-month spread at $ a barrel in backwardation — when later contracts trade at a discount to prompt ones — compared with under a dollar a week ago. The bullish structure signals tight supply.

Traders are also watching for a Federal Reserve interest-rate decision due on Wednesday. A robust economy and still-high inflation in the US have caused investors to pare bets that the central bank’s pivot will happen anytime soon. The resulting strength in the dollar has added pressure to prices.

Traders are “looking beyond the higher-for-longer rate narrative from the Fed,” said Yeap Jun Rong, market strategist with IG Asia Pte. “Market participants are hoping to tap on some optimism around upcoming summer demand.”

©2024 Bloomberg L.P.