Oil Breaks Out of Range With Biggest Weekly Advance in Months

(Bloomberg) — Oil headed for the biggest weekly gain since October as lower US stockpiles and the prospect of more government stimulus in China helped propel crude out of the range it had been stuck in for months.

Most Read from Bloomberg

West Texas Intermediate edged above $77 a barrel on Friday, and was on pace for a weekly gain of more than 5%, its biggest since the week following the start of the Israel-Hamas war. Crude jumped on Thursday in a rally ignited by positive fundamental news and extended by trading algorithms.

The surge also pushed Brent through its key 200-day moving average for the first time since November on Thursday. Still, the global benchmark settled overbought on its nine-day relative strength index, suggesting the surge may have been overdone.

Crude’s advance has been underpinned by elevated tensions in the Middle East, with the US striking Iran-backed Houthi rebels in Yemen to force them to halt attacks on commercial shipping. Elsewhere, drone attacks on refineries in Russia endangered crude flows as the war in Ukraine drags on.

Oil has gained more than 8% in January, with additional support from an unexpectedly large drawdown in US inventories and efforts by Chinese policymakers to shore up the economy. Still, many traders remain cautious given prospects for robust supplies from non-OPEC producers, as well as slower demand growth in major importers, including India.

There’s been a marked widening in some of crude’s closely watched timespreads, signaling tighter conditions. Brent’s three-month spread has gapped out to about $1.25 a barrel in backwardation, a bullish pattern. That’s up from a differential of just 16 cents a barrel at the start of the month.

Story continues

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

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.