Oil Advances on Potential Iran Reprisal as Equities Edge Higher

(Bloomberg) -- Oil extended its first weekly gain since early July as equities inched higher, with traders continuing to monitor Iran’s response to last month’s assassination of a Hamas leader in Tehran.

West Texas Intermediate crude rallied to $79 after rising almost 5% last week, while Brent topped $81 a barrel. Tehran reiterated Sunday its determination to punish Israel for the killing, as Iranian state media reported that a missile unit of the country’s military was conducting exercises near the Iraqi border. 

Monday’s gains also came after large reductions in positioning figures across the market last week. Money managers held the smallest net-long position in ICE Brent since the data was first published in 2011, while bullish wagers on gasoline and diesel in the US were also at multiyear lows. 

Crude has tracked a rebound in equity markets since sinking to a seven-month low early last week, with a dour outlook in China also weighing on sentiment. West Texas Intermediate crossed above its 200-day moving average Monday after testing the level multiple times since mid-July, which may have contributed to additional buying. 

“Geopolitical premia built on the expectations of an Iranian reprisal on Israel can only carry the price so far,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “The market needs more hard economic data to hang its hat on and stabilize.”

Traders will be looking to market reports this week for more clarity on supply and demand balances. OPEC on Monday trimmed forecasts for global oil demand this year and next. The International Energy Agency will publish its monthly outlook Tuesday, which will be followed by US inflation data Wednesday.

To get Bloomberg’s Energy Daily newsletter in your inbox, click here.

--With assistance from Yongchang Chin.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.