Oil Fluctuates as Tight Supplies Vie With Broader Risk-Off Mood

(Bloomberg) — Oil swung between gains and losses as financial markets remained under pressure, leaving prices stuck near the upper end of a narrow band they’ve traded in so far this year.

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Global benchmark Brent edged up above $82 a barrel while West Texas Intermediate traded around $77.50. The potential of restrained economic growth due to elevated interest rates has pushed traders away from risk assets including crude, a commodity often correlated to economic demand.

Still, physical markets continue to show signs of strength amid refined-product shortages. Brent’s prompt spread — the difference between its two nearest contracts — strengthened as high as 84 cents in backwardation, hovering at three month highs, excluding volatile contract-expiration dates.

Oil has remained in a roughly $10 trading range this year as the push and pull of bearish and bullish factors mute volatility. Attacks on ships in the Red Sea and the Israel-Hamas war have ramped up tensions in the Middle East and added a geopolitical risk premium to prices. Still, concerns about the outlook for China’s economy and its impact on consumption, as well as the pace of non-OPEC supply growth, are limiting gains.

The “oil price is expected to continue to be range-bound short term despite escalating tensions in the Middle East,” said Helge Andre Martinsen, a senior oil analyst at DNB Bank ASA. “Continued strong non-OPEC production data, from Norway and Canada this week, combined with a soft global economic outlook counter the effect of higher Middle East tensions.”

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