Key oil-market gauges are signaling that crude’s rebound from its biggest drop in more than a month is reflecting a stronger underlying physical market, bolstering futures’ attempt to break out of their recent trading range. 

The U.S. benchmark’s prompt spread, a critical barometer for supply and demand, hovered at the strongest level since November. In the options market, some traders are betting that the worst of oil’s early-year malaise may be over, with contracts that would profit from a rally above US$110 in June futures changing hands in large volumes.

Despite choppy moves in recent days, crude futures have been stuck in a roughly $5 range since the start of December. West Texas Intermediate advanced more than 1 per cent to trade above $71 a barrel on Tuesday, reversing a tumble the previous day that was kicked off by Saudi Arabia trimming its official selling prices. Underpinning the rebound are continued attacks on merchant shipping in the Red Sea and shutdowns of major oil fields in Libya.

Markets will gain further insight into crude’s prospects over the coming quarters when the Energy Information Administration releases its Short-Term Energy Outlook later on Tuesday. The forecasts for U.S. oil production will be among the key takeaways after supply swelled to a record last year.

Prices:

• WTI for February delivery climbed 1.2 per cent to $71.65 a barrel at 10:42 a.m. in New York.
• Brent for March settlement rose 1.1 per cent to $76.97 a barrel.

Recent days have also seen a surge in oil tanker rates, as one Asian shipper sparked a frenzy by hiring a slew of vessels. The move has tightened the availability of the world’s largest tankers and led to the biggest one-day gain in the cost of hauling oil from the U.S. to China since November 2022. High freight rates can sometimes make it difficult to send cargoes over long distances.