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 $110 a barrel in early Asian trading following a US holiday on Monday when there was no settlement. Biden said that a recession isn’t “inevitable,” bolstering the outlook for energy consumption.
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 crisis in Ukraine, the Fed’s pivot toward tighter monetary policy has stoked concerns of an economic slowdown.
President Biden also said on Monday that he’s aiming to decide this week whether to move to suspend the federal gasoline tax in a bid to ease the impact of soaring prices at the pump. The move likely would require Congressional sign-off and could not be taken via executive action.
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 $2.81 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.