(Bloomberg) -- Oil bounced back from a seven-month low as equities led risk assets in a recovery from a global market selloff.
West Texas Intermediate edged higher to settle above $73 a barrel, its first daily gain after tumbling more than 6% over three straight losing sessions. As prices neared the lowest levels this year, traders received multiple warning signs that futures were oversold. Still, it was only when the S&P 500 recovered in New York trading hours that was crude able to recoup its losses.
Meanwhile, traders continued to weigh signs of potential physical market tightness. Those risks include the loss of some Libyan supplies and concerns that the conflict in the Middle East could hurt production from the region.
“Oil prices have fallen in the last few days in lockstep” with equities, with limited reaction to developments in the Middle East, Goldman Sachs Group Inc. analysts including Daan Struyven wrote in a note. They see Brent finding support at $75 a barrel due to the limited risk of a US recession and room for an increase in speculative positioning.
Last week, oil notched its fourth straight weekly decline on signals of faltering demand in the US and China, with the Asian nation rolling out plans to spur domestic consumption over the weekend. On Tuesday a US government report flashed warning signs about consumption in China, citing a weak economy in the Asian country for sputtering oil demand growth.
Traders are bracing for a retaliatory attack on Israel by Iran and regional militias, though Tehran has underlined that it wants to avoid all-out war. Hezbollah and Israeli forces exchanged fire on Tuesday. For months, traders were concerned the conflict could spiral into a more devastating proxy war, embroiling the US and Iran and possibly hampering crude exports.
Oil’s dive also may have been partly arrested by algorithmic traders approaching the peak of their bearish positioning, according to analysis firms.
Investors will be looking to an industry report later Tuesday to gauge US crude inventories after five straight weeks of declines — the longest run since early 2022. Official data is due Wednesday.
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