Brent crude added to gains and West Texas Intermediate (WTI) halted a slide near $65 a barrel after declining below a key technical level, with more price volatility seen before Opec and its allies meet later in June to discuss their output curbs.
Futures in New York rose as much as 0.7 per cent following a 5.1 per cent drop in the past three sessions. They are gaining after closing below their 100-day moving average on Monday for the first time since September, and a gauge of oil volatility is near the highest level in almost four months. Meanwhile, Opec pumped 31.9 million barrels a day last month, unchanged from April when production was the lowest in a year, according to a Bloomberg survey.
Brent futures for August settlement added as much as 44 cents to $75.73 a barrel on the London-based ICE Futures Europe exchange. Prices on Monday fell 2 per cent to $75.29. The global benchmark crude traded at a $10.47 premium to WTI for August.
West Texas Intermediate for July delivery climbed as much as 48 cents to $65.23 a barrel on the New York Mercantile Exchange and traded at $65.14 at 7:45am in London. The contract dropped $1.06, or 1.6 per cent, to $64.75 on Monday. Total volume traded was about 43 per cent below the 100-day average.
Futures were 1.3 per cent lower at 464.8 yuan per barrel on the Shanghai International Energy Exchange. The contract slipped 0.8 per cent on Monday.
Crude has lost its grip on the highest level in more than three years after Saudi Arabia and Russia proposed easing historic output cuts, which were aimed at shrinking a global glut, to replace potential supply losses in Iran and Venezuela. With the American benchmark falling as low as $64.57 a barrel Monday, only 0.3 per cent above the 120-day moving average, traders are continuing to watch the spread between New York and London futures, which has been widening on surging shale production and a lack of pipeline capacity.
“As oil goes toward the 120-day moving average, it’s rebounding on technical signals,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone in Seoul. “Until Opec’s meeting later this month gives us more details about its next steps, we will continue to see volatility in prices.”
The Cboe Oil ETF Volatility Index added more than 6 per cent through Monday from May 25, when Saudi Arabia and Russia signalled that scaling back supply caps is “on the table.” Implied volatility on second-month WTI options contracts held near the highest level since February.
While Opec kept production last month at the lowest level since April 2017, the group and its partners are discussing whether to revive output after supply curbs that began in early 2017 succeeded in eliminating a global surplus. Investors are now looking for clues on whether other members will support the proposal to pump more at a June 22 meeting in Vienna.