Oil rose as investors weighed solid physical market signals against concerns that a global slowdown will erode demand

West Texas Intermediate futures rose above US$110 a barrel, erasing earlier losses, while trading volumes were curtailed by the US Fourth of July holiday. Vitol Group, the biggest independent oil trader, warned over the weekend that surging fuel costs are starting to hurt demand.

Crude has been buffeted over the past month by indications of an impending recession. Yet there have also been supply outages, with protests disrupting exports in Libya and workers in Norway set to strike, offsetting some of the weakness. UK Prime Minister Boris Johnson said on Monday that Saudi Arabia will need to produce more oil to help people deal with the higher cost of living. Key time spreads also show a robust market.

Oil remains more than 40 per cent higher this year after being boosted by the war in Ukraine, which triggered a wave of sanctions on Russian flows. 

Lofty gasoline prices are a challenge for President Joe Biden, who has tapped strategic oil reserves and pushed Middle Eastern suppliers to raise output to bring costs down. In a tweet, Biden urged companies running gas stations to lower prices, a post that was criticized by Amazon.com Inc. founder Jeff Bezos.

“Risk-on sentiment and a stronger dollar have helped to lift prices,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. A potential strike in Norway is also adding to supply issues, he said.  

Prices:

• WTI for August delivery rose 2.1 per cent to US$110.66 a barrel as of 3:30 p.m. New York time
• Due to the US holiday, there will be no settlement on Monday
• Brent for September settlement was up 1.7 per cent at US$113.50

Across the oil market there remain signs of strength. Brent is in a backwardation of almost US$4 a barrel over its nearest two months -- a bullish structure that indicates scarce supply -- while there has also been tightness in the Middle East as Oman futures surge relative to the regional Dubai benchmark. 

Much of the recent strength in oil markets has come in the refined fuels sector. Record dislocations against crude have few quick or easy fixes, Goldman Sachs Group Inc. said in a report.