Oil rises above 2% as recession fears begin to ease

SINGAPORE, May 8 (Reuters) – Oil prices rose more than 2% on Monday as U.S. recession fears eased and some traders saw oil’s three-week slump in demand as exaggerated.

Brent crude was up $1.57, or 2.1%, at $76.87 a barrel by 11:19 a.m. EDT (1519 GMT). US West Texas Intermediate (WTI) crude also rose $1.73, or 2.4%, to $73.07.

A healthy US jobs report for April helped oil rise around 4% on Friday, although strength in the labor market could force the Federal Reserve to keep interest rates higher for longer.

Brent ended last week down around 5.3%, while US crude plunged 7.1% even after Friday’s setback. Both benchmarks were down for three consecutive weeks for the first time since November.

“Oil’s rally (on Monday) follows energy stocks’ comeback on Wall Street last Friday after the US reported strong jobs data, easing concerns about an impending economic recession,” CMC Markets analyst Tina Teng said.

Banking problems have plagued the market recently following the collapse of three major regional banks. However, regional banks’ shares on Monday edged higher after a gain on Friday.

“The market is less concerned about a banking crisis that could lead to a recession and hurt demand,” said Phil Flynn, analyst at Price Futures Group.

Ole Hansen, head of commodity strategy at Saxo Bank, said the recent drop in oil looked excessive.

“An oversold market situation combined with Brent being able to find support ahead of the March slave forced recently established short sellers to seek coverage, potentially highlighting that the recent selloff was overdone,” he said.

Goldman Sachs analysts said on Saturday that concerns over near-term demand and increased supplies were “overblown”.

A round of voluntary production cuts by some members of the Organization of the Petroleum Exporting Countries and Allies, collectively known as OPEC+, begins this month and the group holds its next meeting on June 4.

Before then, US consumer price inflation figures for April will be in focus on Wednesday, which could potentially influence the Fed’s stance on future interest rate decisions.

OPEC’s latest monthly oil market report is due on Thursday, providing an updated reading on the outlook for supply and demand.

Reporting by Sudarshan Varadhan; Editing by Sonali Paul

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