(Bloomberg) -- Oil ticked higher as traders weighed the odds of a recession in the US amid Federal Reserve tightening, with President Joe Biden pushing back against the notion that the world’s largest economy faces a contraction.
West Texas Intermediate for August delivery, the contract with the largest open interest and volume, neared $111 a barrel following a US holiday on Monday when there was no settlement. Biden said a recession isn’t “inevitable,” bolstering the outlook for energy consumption. He also said he’s aiming to decide this week whether to move to suspend the federal gasoline tax.
Oil is headed for a quarterly gain as traders weigh conflicting forces that have stoked volatility. While prices have been supported by rising demand and supply disruptions spurred by the war in Ukraine, the Fed’s pivot toward tighter monetary policy has stoked concerns of an economic slowdown. China’s steady emergence from anti-Covid-19 lockdowns is also buttressing gains.
“Global economic worries are seemingly offset by prospects for higher US and China demand in the near term,” said Stephen Innes, managing partner of SPI Asset Management. The success of mass testing in Shanghai “reinforces the idea that China will push on with a gradual reopening,” he said.
Oil markets remain in backwardation, a bullish pattern in which near-term prices command a premium to longer-dated ones. Brent’s prompt spread -- the difference between its two nearest contracts -- was $2.87 a barrel in backwardation, up from $2.43 a barrel two weeks ago.
Investors are also alert to the possibility of further action from the US and its allies on Russian crude exports. Treasury Secretary Janet Yellen said that talks are continuing on the issue, possibly through a plan that offers exceptions to any European ban on insuring the nation’s shipments.