Singapore: US crude prices on Monday rebounded from their lowest in more than three weeks, staying above $72 as the market assessed the implications of a slowing global economic recovery on energy demand.
Rising stock markets in Asia also prompted participants to cover short positions in a trading session where volumes were expected to be thin because of the US independence day holiday, said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
“Market participants are thinking that around $70 prices are quite cheap,” Emori said.
US crude for August climbed 39 cents to $72.53 a barrel by 7:08am. The New York Mercantile Exchange (NYMEX) will combine Monday’s and Tuesday’s trading sessions because of the holiday in the United States, with a single settlement price on 6 July.
Prices fell every day last week for a cumulative decline of 8.5% in their steepest weekly drop since early May. They touched $71.62, the lowest intraday level since June 8, after a report showing a larger-than-expected drop in US nonfarm payrolls for June of 125,000.
“The downside has already been priced in the oil market and into stocks,” Emori said. “The important thing now is what kind of sentiment will emerge in the market and how investors could be holding positions against the negative market conditions.”
The dollar and US equities fell on Friday after the weak US jobs report rekindled doubts about the strength of recovery yet failed to confirm widespread fears the economy was dipping back into recession.
US data on Friday also showed factory products orders fell more than expected in May, the first decline in nine months and the steepest drop since March 2009.
But Friday’s jobs report also showed the US unemployment rate fell to 9.5% from 9.7% in May.
ICE Brent crude for August rose 38 cents to $72.03.
A weather system located between Jamaica and Honduras in the Caribbean Sea had a 30% chance of developing over the next two days into a tropical cyclone, a category that includes tropical storms and hurricanes, the US National Hurricane Center said late on Sunday.
The system’s location and expected course are similar to those that Hurricane Alex followed during its formation stage in late June, before moving into the Gulf of Mexico, forcing Mexican oil terminals to shut down and U.S. producers to curb output.
Gulf of Mexico oil operations continued to restart on Friday after being shut as a precaution before Hurricane Alex hit Mexico last week.
Money managers cut net long crude oil positions on the New York Mercantile Exchange in the week through Tuesday, reducing bets that prices will rise, the Commodity Futures Trading Commission said on Friday.