Yahoo Finance Oil Snaps Five-Day Rally as Mideast Risks Vie With IEA Outlook
(Bloomberg) -- Oil dropped, breaking a five-day streak of gains, as the prospect of a potential crude surplus overshadowed concern about an escalation in the Middle East conflict.
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WTI dove 2.1% to settle at just above $78 a barrel, with traders taking advantage of a lull in major developments from the region to take profits. The US believes an attack by Iran on Israel has grown more likely and may come as soon as this week.
Investor focus shifted to the International Energy Agency’s monthly report, which indicated that global inventory declines should abate in the final quarter, putting the market at risk of a glut if OPEC+ proceeds with plans to boost supplies. That came a day after the cartel trimmed its demand forecasts for this year and next.
Today’s price move, which runs counter to an upswing in broader markets, shows an unwinding of some risk premium as an Iranian reprisal hasn’t crystallized, according to Rob Haworth, senior investment strategist at US Bank Wealth Management. But relative to last week’s hefty gains, “we’re not seeing much of a selloff at all.”
Read: Oil Won’t Rise ‘Materially’ on Middle East Tensions: Sen (Video)
Crude has rebounded from a multi-month low set earlier in August as worries about the health of the world’s two largest economies and the unwind of carry trades weighed on prices. Recent data showed record-low bullish bets in some parts of the oil market, suggesting there’s room for a potential recovery.
Timespreads are signaling underlying strength in markets, with the gap between WTI’s two nearest contracts widening further in recent sessions. The measure was $1.55 a barrel in the bullish backwardation pattern, compared with 74 cents at the start of last week.
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--With assistance from Alex Longley.
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