Oil Back Above $40, Buoyed By Equity Gains and Technical Support

Oil in London moved back above $40 a barrel, as markets broadly rebounded from Tuesday’s sharp selloff. Futures rose 1.1% after a precipitous slump a day earlier that saw prices settle below $40 for the first time since June 15. While crude rallied along with other risky assets, it also found technical support on Wednesday. Brent dropped a few cents below its 100-day moving average, before turning sharply higher.

Brent moves away from its 100-day moving average Wednesday

Despite the rebound, prices remain below Tuesday’s open. Doubts linger over the strength of Asia’s demand recovery, U.S. consumption is set to ease with the end of the driving season and the easing of OPEC+ curbs on output are weighing on prices. The coronavirus pandemic is still raging and Bank of America Merrill Lynch said it will take three years for oil demand to fully recover from the outbreak even if there’s a vaccine.

“Brent has managed to find support below $40 for a second day with the 100-day moving average attracting some interest,” said Ole Hansen, head of commodities strategy at Saxo Bank. “Overall, however, it is probably the improved risk appetite from rising stocks that has helped an overall challenged short-term fundamental outlook.”

PRICES
Brent for November settlement rose 1.1% to $40.21 a barrel as of 10:10 a.m. in London West Texas Intermediate for October delivery added 1.7% to $37.37

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