Oil ends lower as worries over Gulf outage ease, but crude books weekly gains

The number of U.S. oil rigs last week rose by 3 to 601 this week, according to oil-field services firm Baker Hughes.

The energy complex was previously in bounce mode after WTI fell more than 9% last week and Brent dropped 8.7%. Crude oil subsequently found a footing after last Friday’s strong U.S. jobs report and inflation data this week that showed price pressures moderating. That was boosting hopes that the Federal Reserve wouldn’t need to raise interest rates as aggressively as feared, potentially leaving room for policy makers to rein in still red-hot inflation without sending the economy into recession.

There’s more than a hint of irony in that market narrative, however, noted Alex Kuptsikevich, senior market analyst at FxPro, with a fallback in gasoline prices from record highs the biggest factor in cooling the July consumer-price index reading.

“A sharp slowdown in price growth and a reduction in the fuel component fueled speculation that the Fed would slow policy tightening. But oil is a risky asset, so the rest of the market enjoyed a rise,” he said, in a note. “The implication is that oil rose this week because the economy showed the effects of its decline in the previous two months.”

The price rally of the past week fits into a “corrective rebound picture,” the analyst wrote, warning that if bulls “do not find a new fundamental reason to buy at current levels near $94 for WTI in the next few days, we should expect a bear market recovery.”