After heavy selling pressure on Friday oil prices recovered some ground on Monday with hopes that damage from hurricane Irma would be slightly less than expected.
Oil prices came under sustained selling pressure in US trading on Friday with fears that hurricane Irma could cause extensive damage to the Florida economy which would also have an important impact in undermining overall demand for crude.
The latest Baker Hughes data recorded a small decline in active drilling rigs for the third week in the last four releases, although there was some uncertainty whether the data had been distorted by the impact of hurricane Harvey.
The latest COT data recorded a fresh increase in non-commercial long positions in the latest week following the sharp decline seen the previous week. The data overall should still make crude slightly less vulnerable to a sharp slide on position adjustment.
A slight shift in the track of hurricane Irma triggered a slight easing of fears over severe damage to Florida and this would also lessen the risk of a sharp downturn in crude demand.
An improvement in risk appetite also helped underpin crude prices, although a firmer dollar tone had some impact in curbing support.
Comments from Saudi officials over the weekend that there could be an extension of the current production curbs for a further three months beyond the end of March also helped support sentiment.
In this context, there was a rally in crude on Monday with WTI testing resistance above $49.00 p/b before fading, although Brent was unable to hold above the $54.0 p/b level.
There will still be important uncertainties surrounding the extent of disruption to US demand, production and refining capacity. The main feature is liable to be a sustained increase in volatility in energy prices given these elements of uncertainty.
WTI Oil Price 4-Hour Chart