Oil’s biggest rally this year paused as U.S. stockpile draws failed to quell concerns about demand in an uncertain economy.

West Texas Intermediate stuck close to US$80 a barrel, trading in overbought territory for a third day on the nine-day relative strength index. Brent edged higher at the end of the session after Saudi Arabia hiked its official selling price for oil to Asian customers for the third month in a row, which is considered a vote of confidence in demand.

U.S. crude stockpiles fell 3.7 million barrels last week, which was less than traders expected, while other economic data showed softer business activity last month.

“The rally in crude is likely to be contained in the face of soft economic readings,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. Brent, though, is likely to outperform in the short term as Asian demand remains robust and OPEC cuts more directly impact the global benchmark, she added.

Crude rallied in the first two days of the week after the Organization of Petroleum Exporting Countries and its allies blindsided the market with a surprise supply cut. The cartel’s move, apparently aimed at investors betting against gains, reinvigorated the debate among leading banks about whether crude can rally back to $100 a barrel.

Oil has risen by more than 20 per cent since its lows in March, when a banking crisis harmed appetite for risk assets. Before the lift from the OPEC+ cut, the market was buoyed by expectations for a rebound in Chinese demand after the end of its COVID Zero policy. A weaker dollar has helped to boost the allure of commodities priced in the US currency.

Prices:

• WTI for May delivery fell 10 cents to settle at $80.61 a barrel in New York.
• Brent for June settlement increased 5 cents to settle at $84.99 a barrel.