Oil edges higher as traders weigh tight market, slowdown fears

Oil climbed at the start of the week as investors weighed signs the market remains tight against concerns about an economic slowdown.

West Texas Intermediate rose above $95 a barrel after capping a third weekly decline on Friday, the longest streak of losses this year. The market has seen bouts of volatility recently, characterized by sharp swings and low liquidity, as traders juggle competing supply and demand outlooks.

The Federal Reserve is expected to approve another big interest-rate hike this week as the central bank combats surging inflation, piling pressure on demand. However, oil consumption may exceed expectations even if the global economy falters, according to veteran commodities trader Pierre Andurand.

Oil is still up around 25 percent for the year, although futures have given up most of the gains seen after Russia’s invasion of Ukraine in late February. The US has been championing a price cap on Russian crude to limit revenues flowing to the Kremlin to fund its war, and the Treasury Department’s No. 2 official will be in Europe this week to rally support for the measure.

Russia’s war in Ukraine has prompted a pivot away from the OPEC+ producer by many oil consumers. That’s led to Saudi Arabia and Iraq diverting more and more of their crude toward Europe.

The oil market is steeply backwardated, a bullish pattern market by near-term prices commanding a premium to later-dates ones. Brent’s prompt spread was $4.90 a barrel in backwardation, over $1 higher than the start of the month.