Oil Prices Rise But Trading Increasingly A "Tug Of War," Says Analyst

However, market conditions remain perilously tight: File Image/Pixabay

Another volatile session of crude trading on Thursday ended with the commodity rising higher due to schizophrenic investors now focusing on several supply challenges rather than their main focus of late, the threat of demand due to the lockdowns in China.

West Texas Intermediate settled up $1.60 at $103.79 per barrel, while Brent rose $1.53 to $108.33.
Carsten Fritsch, an analyst at Commerzbank, said, "The oil market continues to be characterized by a tug-of-war between concerns about demand and concerns about supply outages; this is also evident from the constant fluctuations in oil prices."

Phil Flynn, senior market analyst at Price Futures Group Inc., added, "It's not as easy a trade as it was a couple of weeks ago: you have to risk more, and that may be by design with these hedge funds and also funds trading more."

Essentially, traders on Thursday were worried about Russian output having fallen due to its invasion of Ukraine and subsequent sanctions from other countries, combined with protests in Libya blocking that country's smooth provision of output.

Certain to stoke those fears were reports on Thursday that the European Union is striving to cut oil use by 220 million barrels in order to help wean the continent off its dependence on Russian energy exports.

However, given the market's mindset, wild bullish or bearish swings are equally likely, and Flynn pointed out that the market is assessing the possibility that slowed growth or additional supply could eventually erode the bullish sentiment that has dominated trading for 2022.

In the meantime, the market remains tight: according to the U.S. Energy Department domestic stocks of distillate fuels are near 14-year lows.