Americas News
Analysts See Oil's Recent Sell-off as 'Overdone'
Strong jobs data from the U.S. helped ease recession fears that had been governing oil trading over the past few weeks, with prices on Monday up over 2 percent.
Brent settled up $1.71, or 2.3 percent, at $77.01 per barrel, while West Texas Intermediate gained $1.82, or 2.6 percent, to $73.16.
According to the U.S. Labour Department, the unemployment rate fell to a 53-year low of 3.4 percent in April, and while numbers for February and March were revised much lower, the labour market was slowing only marginally.
Sean Snaith, director of the University of Central Florida's Institute for Economic Forecasting, said, "This kind of strength in the labour market makes it more difficult for the Fed to continue its reduction in inflation."
Monday's oil price gains along with Friday's rebound caused Ole Hansen, head of commodity strategy at Saxo Bank, to view the commodity's recent drastic selloff as excessive.
He said, "An oversold market condition combined with Brent managing to find support ahead of the March low forced recently established short sellers to seek cover, potentially highlighting that the recent sell-off was overdone."
Paul Horsnell, head of commodities research at Standard Chartered Bank, put it another way; he said, "The jobs numbers are certainly helping, but occasionally the answer to why the price has gone up is the simple one: that it was too low."
Horsnell added that the rash of short selling that plagued that market couldn't be justified by macro-economic data or oil fundamentals, and he cited physical demand signals as another sign that price weakness was overdone.
Meanwhile, oil trading on Monday was also supported by wildfires in Alberta, which reportedly could take months to bring under control and have prompted energy producers to shut in at least 185,000 barrels of oil equivalent per day (boepd), about 2 percent of Canada's output.
TC Energy closed two compressor stations on its NGTL gas pipeline system, which connects most of the natural gas produced in western Canada to domestic and export markets.
