Oil gets more reason to head past $100 and stay there for the near term. Image Credit: Reuters

Dubai: Oil held above $100 a barrel after posting the biggest one-day advance since May as fears of a tightening market rattled traders. The West Texas Intermediate eased, but retained the bulk of Monday’s rise of more than 5 per cent.

Oil markets have seen volatile trading in recent weeks as traders navigated concerns that a looming recession would hurt demand, the fallout from a stronger dollar, and signs that underlying physical conditions remain tight. At the same time, the US is pressing ahead with a plan to try to cap Russian crude prices.

“The force majeure on some crude flows through the Keystone pipeline cuts Canadian crude exports to the US and is price-supportive,” said Vandana Hari, founder of Vanda Insights in Singapore. “But that will now have to wrestle with ongoing demand fears on account of the economy.”

Still despite the slowdown concerns, oil markets are steeply backwardated, a bullish pattern marked by near-term prices trading above longer-dated ones. Brent’s prompt spread - the difference between its two nearest contracts - was $4.44 a barrel, up by more than $1 from a week ago.

On his visit to Saudi Arabia, President Biden urged producers from the region to boost supplies. In response, Saudi ministers insisted policy decisions would be taken according to market logic and within the OPEC+ coalition.

“The whole concept of going to Saudi Arabia to ask for extra production is sort of impractical,” Fereidun Fesharaki, chairman of industry consultant FGE, told Bloomberg TV, noting that the Kingdom has already been pumping crude at close to its historical peak, with little spare capacity likely left to tap. “If there’s no buffer in the market, the prices will go haywire.”

Crude will trade at more than $100 a barrel for the rest of the year and stay high after that, requiring OPEC+ to manage supply and demand, according to Iraqi Oil Minister Ihsan Abdul Jabbar.