Inflation pummelled analysts remain cautious in their outlook: File Image/Pixabay
While fears remained the perpetual driver of oil prices on Monday, the fears shifted somewhat from concerns over demand due to inflation to worries about tightening supplies in key parts of the world – and as a result, crude prices gained over 1 percent.
Brent rose $1.06, or 1.4 percent, to settle at $75.23 per barrel, while West Texas Intermediate settled at $71.11 per barrel, up $1.07 or 1.5 percent.
Prices rose after three straight sessions of declines partly due to the wildfires in Alberta, Canada, which shut large amounts of crude supply: at least 300,000 barrels of oil equivalent per day (boepd) production was shut in last week.
Peter McNally, analyst, Third Bridge
The OPEC+ cuts are likely to have a greater impact as we move through the summer
Unfortunately, experts say there won't be any rain to help douse the fires for at least 10 days, causing Christie Tucker, an agency official with Alberta Wildfire, to state, "I don't believe the worst is behind us."
Pundits also noted that the additional cuts recently announced by the Organization of the Petroleum Exporting Countries (OPEC) could cause global crude supplies to tighten.
Peter McNally, analyst at Third Bridge, said, "The OPEC+ cuts are likely to have a greater impact as we move through the summer, as previous attempts to balance the markets were offset by seasonal weakness and the release of strategic reserves."
But few if any analysts felt comfortable viewing Monday's modest gains as the beginning of an upward trend for crude: Ed Moya, senior market analyst at Oanda, described trading activity thusly: "Oil is playing tug-of-war with a tight market and rising economic uncertainty as debt-ceiling talks will likely lead to some market stress."
He added that, "This week, energy traders will pay close attention to the retail sales report to see if the consumer remains in decent shape."
Finally on Monday, Craig Erlam, analyst at Oanda, struck a cautiously optimistic tone by remarking, "If credit conditions ease over the coming months, allaying economic fears for the world's largest economy, oil prices could bounce back without assistance.
"But it seems a little premature at this point."