By Adedapo Adesanya
Oil prices rose over 2 per cent on Monday as recession fears in the United States eased, resulting in Brent crude adding $1.71 or 2.3 per cent to trade at $77.01 and the US West Texas Intermediate (WTI) crude growing by $1.82 or 2.6 per cent to $73.16.
Brent had finished last week with a decline of about 5 per cent, while US crude plunged by 7 per cent even after Friday’s rebound. Both benchmarks were down for three weeks in a row for the first time since November.
However, the new week brought a boost as a healthy jobs report for April in the US helped oil to climb, even though it indicated that the labour market strength could see the Federal Reserve keep interest rates higher for longer.
The US Labor Department’s closely watched employment report on Friday also showed the unemployment rate falling back to a 53-year low of 3.4 per cent, easing concerns about an imminent economic recession.
Meanwhile, banking concerns have plagued the market recently after the collapse of three major US regional banks in recent months.
Also supporting oil prices was the declaration of a state of emergency over the weekend by Canada in response to wildfires that have displaced nearly 30,000 people and prompted energy producers to shut in at least 185,000 barrels of oil equivalent per day, about 2 per cent of the North American country’s output.
Canada is the world’s fourth-largest crude producer, and about 80 per cent of its oil comes from Alberta.
The market is also working around voluntary output cuts by some members of the Organisation of the Petroleum Exporting Countries and allies, together called OPEC+, which began this month.
The group will hold its next meeting on June 4, and before that, it will release its monthly oil market report on Thursday (May 11), which will provide an updated reading on the demand and supply outlook.
Some analysts continue to be concerned about future oil demand based on what is viewed as a deteriorating growth outlook.
But over the weekend, Goldman Sachs labelled the recent oil sell-off as “overblown” in the face of a strong demand outlook, noting that production cuts from OPEC+ were putting further pressure on supply.
Dipo Olowookere