Oil Edges Higher With Physical Markets Showing Signs of Strength

(Bloomberg) — Oil edged higher as pockets of strength in physical crude markets helped to further this month’s rally.

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West Texas Intermediate rose above $78, trading near the highest levels reached in 2024. In the physical market, refineries are benefiting from strong margins while foreign buyers turned to American crude to avoid Red Sea shipping issues.

The US benchmark’s prompt spread — the price difference between its two nearest contracts — has widened to 55 cents in backwardation, up from the bearish contango structure less than four weeks ago. The move indicates a tightening supply outlook.

Trading volumes were muted as many market participants attend International Energy Week in London, a major industry gathering, where attendees are set to weigh the outlook for oil this year. Russell Hardy, chief executive officer of Vitol Group, is among the scheduled speakers on the opening day.

Oil is grinding its way toward a second straight monthly advance, although it’s yet to break decisively out of its recent, narrow range. While tensions in the Middle East and OPEC+ supply curbs have supported crude prices, higher production from outside the group, especially the US, has capped the gains.

The market’s opposing drivers have prompted both Goldman Sachs Group Inc. and Bank of America Corp. to predict that rangebound trading will persist in the near term. Goldman sees a $20 band centered on $80 a barrel, with muted volatility, while its rival expects oil to hold between $60 and $80.

Meanwhile, China’s recent travel boom during the Lunar New Year holiday added positive demand signals to the market. Local refiners have been snapping up cargoes from across the world since the mid-February holiday.

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